The table below is the combined balance sheet for all the banks in a banking system. Each bank has a target reserve ratio of 4%. Liabilities / Equity Demand deposits Shareholders' equity Assets Reserves Loans Securities. Fixed assets Total $400 2,000 1,500 500 $4,400 $ (1) (2) Total $3,800 600 $4,400 $ (1) $ (2) a. Fill in the blanks in columns (1) reflecting the complete effect of all excess reserves being loaned out. b. The maximum possible increase in the money supply is $ c. Returning to the original balance sheet, if the target reserve ratio changes to 12.5%, the quantity of loans the system be forced to call in will be $ Write in the figures in columns (2) that show this process completed.
The table below is the combined balance sheet for all the banks in a banking system. Each bank has a target reserve ratio of 4%. Liabilities / Equity Demand deposits Shareholders' equity Assets Reserves Loans Securities. Fixed assets Total $400 2,000 1,500 500 $4,400 $ (1) (2) Total $3,800 600 $4,400 $ (1) $ (2) a. Fill in the blanks in columns (1) reflecting the complete effect of all excess reserves being loaned out. b. The maximum possible increase in the money supply is $ c. Returning to the original balance sheet, if the target reserve ratio changes to 12.5%, the quantity of loans the system be forced to call in will be $ Write in the figures in columns (2) that show this process completed.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:The table below is the combined balance sheet for all the banks in a banking system. Each bank has a target reserve ratio of 4%.
Liabilities / Equity
Demand deposits
Shareholders' equity
Assets
Reserves
Loans
Securities
Fixed assets
Total
$400
2,000
1,500
500
$4,400
$
(1)
$
(2)
Total
$3,800
600
$4,400
a. Fill in the blanks in columns (1) reflecting the complete effect of all excess reserves being loaned out.
b. The maximum possible increase in the money supply is $
(1)
$
$
(2)
c. Returning to the original balance sheet, if the target reserve ratio changes to 12.5%, the quantity of loans the system be forced to call
in will be $
Write in the figures in columns (2) that show this process completed.
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