Refer to the T account for an imaginary bank Assets Liabilities Deposits $45,000 Reserve $5,000 Loan $40,000 Based on the information given in the table calculate the following: 1. If the reserve ratio is 10% then calculate any excess reserve. 2. If the bank decides to loan out the excess reserve then how much money supply that excess reserve can create?

Refer to the T account for an imaginary bank Assets Liabilities Deposits $45,000 Reserve $5,000 Loan $40,000 Based on the information given in the table calculate the following: 1. If the reserve ratio is 10% then calculate any excess reserve. 2. If the bank decides to loan out the excess reserve then how much money supply that excess reserve can create?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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part-c: Suppose I live in a hypothetical country, Pandesia, where there is 100% reserve banking. I deposit $1,000 in a checking account at the 1st National Bank of Pandesia. Using the T-account (ie: assets on the left and liabilities on the right), explain whether / how my deposit changes the money supply in Pandesia. DON'T ANSWER PART C Just use part c to answer D part-d: Now suppose the Central Bank of Pandesia (CBP) decides that after centuries of 100% reserve banking, it is time for a change and decide to switch the Pandesian banking system to fractional reserve banking. To begin with, board of governors at the CBP agree on a required reserve ratio of 10%. How does my deposit of $1,000 at the 1st National Bank of Pandesia impact the money supply in Pandesia after this change? Explain by using the T-account. part-e: Next suppose that Pandesian economy enters a recession. To fight against the unemployment created by the recession, CBP decides to expand the Pandesian money supply.…
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suppose the required reserve ratio is 11%. How much additional money can BBB lend out at a maximum? suppose the required reserve ratio is lowered to 8%. What is the Maximum amount of additional money that BBB can lend out? Is this different than the maximum amount of new money BBB can create by itself? 3. suppose the required reserve ratio is raised to 15%. What is the maximum amount of additional money BBB can lend out?
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