Problem 1: Metropolis National Bank is currently holding 2% of its deposits as excess reserves. Liabilities Assets Deposits $60,000 $500,000 Reserves $440,000 Loans a. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement? Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assuming that all banks have the same required reserve ratio, and then none want to hold excess reserves what is the value of the money multiplier? b. c. Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assume that no banks in the economy want to hold excess reserves and that people only hold deposits and no currency. How much does the money supply ultimately increase when Metropolis National Bank lends out its excess reserves? Metropolis National Bank is holding 2% of its deposits as excess reserves. Assume that no banks in the economy want to maintain holdings of excess reserves and that people only hold deposits and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by how much will the money supply increase? d.
Problem 1: Metropolis National Bank is currently holding 2% of its deposits as excess reserves. Liabilities Assets Deposits $60,000 $500,000 Reserves $440,000 Loans a. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement? Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assuming that all banks have the same required reserve ratio, and then none want to hold excess reserves what is the value of the money multiplier? b. c. Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assume that no banks in the economy want to hold excess reserves and that people only hold deposits and no currency. How much does the money supply ultimately increase when Metropolis National Bank lends out its excess reserves? Metropolis National Bank is holding 2% of its deposits as excess reserves. Assume that no banks in the economy want to maintain holdings of excess reserves and that people only hold deposits and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by how much will the money supply increase? d.
Chapter1: Making Economics Decisions
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Part d
Transcribed Image Text:Problem 1:
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
Liabilities
Assets
Deposits
$60,000
$500,000
Reserves
$440,000
Loans
a. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the
reserve requirement?
Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assuming that
all banks have the same required reserve ratio, and then none want to hold excess reserves what is
the value of the money multiplier?
b.
c. Metropolis National Bank is currently holding 2% of deposits as excess reserves. Assume that no
banks in the economy want to hold excess reserves and that people only hold deposits and no
currency. How much does the money supply ultimately increase when Metropolis National Bank
lends out its excess reserves?
Metropolis National Bank is holding 2% of its deposits as excess reserves. Assume that no banks
in the economy want to maintain holdings of excess reserves and that people only hold deposits
and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds
to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its
excess reserves, by how much will the money supply increase?
d.
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