Question B4 (a) Table 5 shows the balance sheet of the banking system of Country Z as of 31 May 2021. Reserve Loan Total Assets $(billions) 300 1,500 1,800 Deposits Total Table 5 Liabilities $ (billions) 1,800 1,800 The current required reserved ratio was 12% and the public holds $90 billion cash in hand. (i) Calculate the current money supply. Does the banking system fully loan up? Support your answer with relevant figure and show your workings. (ii) Draw a new balance sheet of the banking system of Country Z if the central bank increases the required reserve ratio by 3% and the banking system is fully loaned up. Show your workings. (b) Hong Kong government decided to sell up to $2.55 billion retail green bond this month. Explain how this action could affect the money supply in Hong Kong.
Question B4 (a) Table 5 shows the balance sheet of the banking system of Country Z as of 31 May 2021. Reserve Loan Total Assets $(billions) 300 1,500 1,800 Deposits Total Table 5 Liabilities $ (billions) 1,800 1,800 The current required reserved ratio was 12% and the public holds $90 billion cash in hand. (i) Calculate the current money supply. Does the banking system fully loan up? Support your answer with relevant figure and show your workings. (ii) Draw a new balance sheet of the banking system of Country Z if the central bank increases the required reserve ratio by 3% and the banking system is fully loaned up. Show your workings. (b) Hong Kong government decided to sell up to $2.55 billion retail green bond this month. Explain how this action could affect the money supply in Hong Kong.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Question B4
(a) Table 5 shows the balance sheet of the banking system of Country Z as of 31 May 2021.
Liabilities
$ (billions)
1,800
Assets
S (billions)
Reserve
Loan
Deposits
300
1,500
1,800
Total
Total
1,800
Table 5
The current required reserved ratio was 12% and the public holds $90 billion cash in hand.
(i) Calculate the current money supply. Does the banking system fully loan up? Support
your answer with relevant figure and show your workings.
(ii) Draw a new balance sheet of the banking system of Country Z if the central bank
increases the required reserve ratio by 3% and the banking system is fully loaned up.
Show your workings.
(b) Hong Kong government decided to sell up to $2.55 billion retail green bond this month.
Explain how this action could affect the money supply in Hong Kong.
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