Principles Of Economics V8.0
Principles Of Economics V8.0
18th Edition
ISBN: 9781453384503
Author: Taylor, John B.; Weerapana, Akila
Publisher: BOSTON ACADEMIC (DBA FLAT WORLD)
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Chapter 27, Problem 31P

Humongous Bank is the only bank in the economy. The people in this economy have $ 2 0 million in money, and they deposit all their money in Humongous Bank.

  1. Humongous Bank decides on a policy of holding 1 00 % reserves. Draw a T-account for the bank.
  2. Humongous Bank is required to hold 5 % of its existing $ 2 0 million as reserves, and to loan out the rest. Draw a T-account for the bank after it has made its first round of loans.
  3. Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original $ 19 million loan?

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