a) Suppose that the bank has the following balance sheet. Answer the following questions: Assets Liabilities Reserves: Deposits: $500 Loans: i) If the bank keep all money as reserve, fill in the T-account. What is the change in money supply? ii) Suppose that Central bank's reserve requirement is 20 percent of deposits What is the maximum amount that money supply could increase by the banking system? b) The banking system currently has $300 billion of reserves, none of which are excess People hold only deposits and no currency, and the reserve requirement is 20 percent if the Central bank reduces the reserve requirement to 15 percent, then by how much does the money supply change?
a) Suppose that the bank has the following balance sheet. Answer the following questions: Assets Liabilities Reserves: Deposits: $500 Loans: i) If the bank keep all money as reserve, fill in the T-account. What is the change in money supply? ii) Suppose that Central bank's reserve requirement is 20 percent of deposits What is the maximum amount that money supply could increase by the banking system? b) The banking system currently has $300 billion of reserves, none of which are excess People hold only deposits and no currency, and the reserve requirement is 20 percent if the Central bank reduces the reserve requirement to 15 percent, then by how much does the money supply change?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
Problem 10PA
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