Suppose the Canadian economy has only two commercial banks: Bank A and Bank B. The following table shows their current balance sheets in dollars. Deposits Loans Reserve The money supply in period 1 Bank A Assets 75.1 83 Liabilities 158.1 Assets 122.14 135 Bank B Liabilities 257.14 a. Suppose that individuals hold 417 dollars in cash. What is the money supply in the economy? Express your answer in dollars rounded to the nearest second decimal. b. Suppose that the banks cannot make additional loans because they would exceed their desire reserve ratio (both banks have he same reserve ratio). What is the reserve ratio? Express your answer in percentage rounded to the nearest first decimal.

Suppose the Canadian economy has only two commercial banks: Bank A and Bank B. The following table shows their current balance sheets in dollars. Deposits Loans Reserve The money supply in period 1 Bank A Assets 75.1 83 Liabilities 158.1 Assets 122.14 135 Bank B Liabilities 257.14 a. Suppose that individuals hold 417 dollars in cash. What is the money supply in the economy? Express your answer in dollars rounded to the nearest second decimal. b. Suppose that the banks cannot make additional loans because they would exceed their desire reserve ratio (both banks have he same reserve ratio). What is the reserve ratio? Express your answer in percentage rounded to the nearest first decimal.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

Subject:economic

Suppose the Canadian economy has only two commercial banks: Bank A and Bank B. The following table shows their current
balance sheets in dollars.
Deposits
Loans
Reserve
The money supply in period 1
Bank A
& A
Assets
75.1
83
Liabilities
158.1
Assets
122.14
135
Bank B
Liabilities
257.14
a. Suppose that individuals hold 417 dollars in cash. What is the money supply in the economy? Express your answer in
dollars rounded to the nearest second decimal.
& A
b. Suppose that the banks cannot make additional loans because they would exceed their desire reserve ratio (both banks
have he same reserve ratio). What is the reserve ratio? Express your answer in percentage rounded to the nearest first
decimal.

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