Suppose the required reserve ratio is 10%. What is the maximum amount of money Big buck bank can create? 5  If the reserve ratio is increased to 14%, what is the maximum amount of money BBB can create?  3 If the reserve ratio is still at 10% and BBB chose to buy bonds instead of making loans with its excess reserves,  what is the maximum amount of money BBB can create?  From question #1 , if the prospective Loans and Bonds both paid interest of 6.8%, which strategy would be more profitable for BBB?  If BBB decided to pursue #1 as a strategy, what is the maximum money making potential of the banking system (same reserve ratio 10%)?

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter14: Banking And The Money Supply
Section: Chapter Questions
Problem 2.3P
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  1. Suppose the required reserve ratio is 10%. What is the maximum amount of money Big buck bank can create? 5 
  2. If the reserve ratio is increased to 14%, what is the maximum amount of money BBB can create? 

3 If the reserve ratio is still at 10% and BBB chose to buy bonds instead of making loans with its excess reserves,  what is the maximum amount of money BBB can create? 

  1. From question #1 &#3, if the prospective Loans and Bonds both paid interest of 6.8%, which strategy would be more profitable for BBB? 
  2. If BBB decided to pursue #1 as a strategy, what is the maximum money making potential of the banking system (same reserve ratio 10%)? 
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