Assume a banking system with the following balance sheet Assets Liabilities Reserves $400 000 Checkable deposits $1 000 000 Loans $600 000 Total $1 000 000 Total $1 000 000 a- Suppose that the bank is fully loaned up, what is the required reserve ratio? b- Now suppose that the required reserve ratio is 20%, show the new T-account. c- By how much can the bank increase its loans? d- By how much can the money supply change now?
Assume a banking system with the following balance sheet Assets Liabilities Reserves $400 000 Checkable deposits $1 000 000 Loans $600 000 Total $1 000 000 Total $1 000 000 a- Suppose that the bank is fully loaned up, what is the required reserve ratio? b- Now suppose that the required reserve ratio is 20%, show the new T-account. c- By how much can the bank increase its loans? d- By how much can the money supply change now?
Chapter1: Making Economics Decisions
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![Problem 4
Assume a banking system with the following balance sheet
Assets
Liabilities
Reserves $400 000
Checkable deposits
$1 000 000
Loans
$600 000
Total
$1 000 000
Total $1 000 000
a- Suppose that the bank is fully loaned up, what is the required reserve ratio?
b- Now suppose that the required reserve ratio is 20%, show the new T-account.
c- By how much can the bank increase its loans?
d- By how much can the money supply change now?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F556b6310-cfd5-4a2e-b07f-0454de7bf2d9%2F0386a2d9-4567-46ca-b63f-fcc8b2adacdd%2F8sa3hki_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 4
Assume a banking system with the following balance sheet
Assets
Liabilities
Reserves $400 000
Checkable deposits
$1 000 000
Loans
$600 000
Total
$1 000 000
Total $1 000 000
a- Suppose that the bank is fully loaned up, what is the required reserve ratio?
b- Now suppose that the required reserve ratio is 20%, show the new T-account.
c- By how much can the bank increase its loans?
d- By how much can the money supply change now?
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