Written Question Points 5 For the written portion please select one of the two q
ID: 1130545 • Letter: W
Question
Written Question Points 5 For the written portion please select one of the two questions written belovw. Option 11 Required reserve ratio: 20 Reserves Loans Total Assets 400 600 1000 1000 Deposits 1000 Option 1] Part 1) 2 points What t are required reserves for this bank? How much are the Excess reserves for this bank? Option 1: Part 2] 3 points Please use the following table for the remainder of the question: Assume the bank will not hold more then what is required by the reserve ratio Liabilities 1000 Assets Deposits Reserves 200 800 1000 Loans 1000 Total How much did the deposits increase the money supply? What would happen to the money supply if the Required reserve ratio was decreased to.10? By how much will the money supply change?Explanation / Answer
The required reserves are 20% of 1000(laibilities) =200
Excess reserves=reserves-required reserves=400-200=200
Money multiplier =1/20%=5.so money supply increases by 5 multiplied by 1000(laibilities)=5000
If required ratio was decreased to 10% then multiplier=1/10%=10.so money supply will change by 10 multiplied by 1000=10000
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