Problem 3: Liabilities Assets Deposits $180,000 $19,800 160,200 Reserves Loans a. If the Bank of Springfield has lent out all the money it can give its level of deposits, then what is the reserve requirement? Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier? b. c. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold? Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase d.

Problem 3: Liabilities Assets Deposits $180,000 $19,800 160,200 Reserves Loans a. If the Bank of Springfield has lent out all the money it can give its level of deposits, then what is the reserve requirement? Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier? b. c. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold? Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase d.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

Part d

Problem 3:
Liabilities
Assets
Deposits
$180,000
$19,800
160,200
Reserves
Loans
a. If the Bank of Springfield has lent out all the money it can give its level of deposits, then what is
the reserve requirement?
Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the
value of the money multiplier?
b.
c. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank
of Springfield now hold?
Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new
loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess
reserves. Assume also that people hold only deposits and no currency. Then by what amount does
the economy's money supply increase
d.

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