An individual deposits $2,000 in cash into her checking account. Calculate each of the following: The immediate change in excess reserves.The total increase in the money supply that will be generated from the transaction. Using a correctly labeled graph of the money market, show the effect of the Federal Reserve selling bonds on the nominal interest rate. AssetsLiabilitiesDemand DepositsOwner's EquityRequired Reserves$200$2000Excess Reserves$0$1500Customer Loans$1800Government Securities (bonds)$600Building and fixtures$900

For the bank, the deposits are the assets and the loans are the assets as bank is obliged to pay to…

Answered: An individual deposits $2,000 in cash…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An individual deposits $2,000 in cash into her checking account. Calculate each of the following:

The immediate change in excess reserves.
The total increase in the money supply that will be generated from the transaction.
Using a correctly labeled graph of the money market, show the effect of the Federal Reserve selling bonds on the nominal interest rate.

Assets
Liabilities
Demand Deposits
Owner's Equity
Required Reserves
$200
$2000
Excess Reserves
$0
$1500
Customer Loans
$1800
Government Securities (bonds)
$600
Building and fixtures
$900

Definition Definition Capital reserves held by banks or financial institutions over and above the reserves that are required to be maintained by the regulator toward its liabilities and for internal controls. For commercial banks, excess reserve is the amount over the standard reserve as decided by the central bank. These excess reserve funds are available in the form of cash and cash equivalents.

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