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.

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter14: Money And Banking

Section14.2: History Of Americans Money And Banking

Problem 2R

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