Еxcess Lender Required Reserves Bank New Deposit Reserves Borrower (Depositor) (Loans) James Bank A $5000 $3000 John John Bank B Stephanie Stephanie Bank C Tom (continue) 8. The required reserve ratio (RRR) is _ 9. Before Bank A makes a loan to John, James' deposit (cash: $5000) will lead to the change in (net) money supply up to s_ 10. With the RRR from (#8), complete the table. (NOTE: do not use "power" expression like in the handout. Determine each number by using your calculator (if needed))

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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### Banking and Reserve Requirements

#### Using the Table

| Lender (Depositor) | Bank  | New Deposit | Required Reserves | Excess Reserves (Loans) | Borrower |
|--------------------|-------|-------------|-------------------|------------------------|----------|
| James              | Bank A| $5000       |                   | $3000                  | John     |
| John               | Bank B|             |                   |                        | Stephanie|
| Stephanie          | Bank C|             |                   |                        | Tom      |

*Note: The table continues with additional entries not shown here.*

8. **The required reserve ratio (RRR) is ______.**

9. **Before Bank A makes a loan to John, James' deposit (cash: $5000) will lead to the change in (net) money supply up to $___________.**

10. **With the RRR from (#8), complete the table. (NOTE: do not use "power" expression like in the handout. Determine each number by using your calculator (if needed))**

---

#### Explanation of the Table:

This table shows the relationship between depositors, banks, and borrowers, highlighting how new deposits are allocated into required reserves and loans. Each new deposit has a portion kept back as required reserves, and the remaining portion is available for lending.

- **Lender (Depositor):** The person who deposits money into the bank.
- **Bank:** The banking institution receiving the deposit.
- **New Deposit:** The amount of money deposited by the lender.
- **Required Reserves:** The portion of the deposit that must be held in reserve by the bank, as per the required reserve ratio (RRR).
- **Excess Reserves (Loans):** The portion of the deposit that the bank can lend out after setting aside the required reserves.
- **Borrower:** The individual who receives a loan from the bank’s excess reserves.

The table is used to calculate the impact of deposits and loans on the money supply. It also helps to understand how the required reserve ratio affects the bank's ability to lend and thus influence the overall economy.
Transcribed Image Text:### Banking and Reserve Requirements #### Using the Table | Lender (Depositor) | Bank | New Deposit | Required Reserves | Excess Reserves (Loans) | Borrower | |--------------------|-------|-------------|-------------------|------------------------|----------| | James | Bank A| $5000 | | $3000 | John | | John | Bank B| | | | Stephanie| | Stephanie | Bank C| | | | Tom | *Note: The table continues with additional entries not shown here.* 8. **The required reserve ratio (RRR) is ______.** 9. **Before Bank A makes a loan to John, James' deposit (cash: $5000) will lead to the change in (net) money supply up to $___________.** 10. **With the RRR from (#8), complete the table. (NOTE: do not use "power" expression like in the handout. Determine each number by using your calculator (if needed))** --- #### Explanation of the Table: This table shows the relationship between depositors, banks, and borrowers, highlighting how new deposits are allocated into required reserves and loans. Each new deposit has a portion kept back as required reserves, and the remaining portion is available for lending. - **Lender (Depositor):** The person who deposits money into the bank. - **Bank:** The banking institution receiving the deposit. - **New Deposit:** The amount of money deposited by the lender. - **Required Reserves:** The portion of the deposit that must be held in reserve by the bank, as per the required reserve ratio (RRR). - **Excess Reserves (Loans):** The portion of the deposit that the bank can lend out after setting aside the required reserves. - **Borrower:** The individual who receives a loan from the bank’s excess reserves. The table is used to calculate the impact of deposits and loans on the money supply. It also helps to understand how the required reserve ratio affects the bank's ability to lend and thus influence the overall economy.
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