Bank Reserves; Suppose that the reserve ratio is .25, and that a bank has actual reserves of $15,000, loans of $40,000, and demand deposits of $50,000. A. Excess reserves are $____________________. B. This bank, being a single bank in a multibank system, can safely lend $____________________. C. The multibank system can safely lend $__________________. D. It is possible for the monetary base to increase by a total of $___________________. Assume now that the Fed lowers the reserve ratio to .20: E. This bank, being a single bank in a multibank system, can now safely lend $___________. F. The multibank system can safely lend $____________________. G. It is now possible for the monetary base to increase by a total of $________________________. H. The increase/decrease in the potential money supply because of the decrease in the required reserve ratio is $_____________________.
Solution
Answer Bank Reserves; Suppose that the reserve ratio is .25, and that a bank has actual reserves of $15,000, loans of $40,000, and demand deposits of $50,000. A. Excess reserves are $________$2500____________. B. This bank, being a single bank in a multibank system, can safely lend $_______40000____________. C. The multibank system can safely lend $___________0_______. D. It is possible for the monetary base to increase by a total of $_________37500__________. Assume now that the Fed lowers the reserve ratio to .20: E. This bank, being a single bank in a multibank system, can now safely lend $____5000_______. F. The multibank system can safely lend $_____________42500_______. G. It is now possible for the monetary base to increase by a total of $_________40000_______________. H. The increase/decrease in the potential money supply because of the decrease in the required reserve ratio is $_________2500____________.
.
Bank Reserves- Suppose that the reserve ratio is -25- and that a bank.docx
1. Bank Reserves; Suppose that the reserve ratio is .25, and that a bank has actual reserves of
$15,000, loans of $40,000, and demand deposits of $50,000. A. Excess reserves are
$____________________. B. This bank, being a single bank in a multibank system, can safely
lend $____________________. C. The multibank system can safely lend
$__________________. D. It is possible for the monetary base to increase by a total of
$___________________. Assume now that the Fed lowers the reserve ratio to .20: E. This bank,
being a single bank in a multibank system, can now safely lend $___________. F. The multibank
system can safely lend $____________________. G. It is now possible for the monetary base to
increase by a total of $________________________. H. The increase/decrease in the potential
money supply because of the decrease in the required reserve ratio is
$_____________________.
Solution
Answer Bank Reserves; Suppose that the reserve ratio is .25, and that a bank has actual reserves
of $15,000, loans of $40,000, and demand deposits of $50,000. A. Excess reserves are
$________$2500____________. B. This bank, being a single bank in a multibank system, can
safely lend $_______40000____________. C. The multibank system can safely lend
$___________0_______. D. It is possible for the monetary base to increase by a total of
$_________37500__________. Assume now that the Fed lowers the reserve ratio to .20: E. This
bank, being a single bank in a multibank system, can now safely lend $____5000_______. F.
The multibank system can safely lend $_____________42500_______. G. It is now possible for
the monetary base to increase by a total of $_________40000_______________. H. The
increase/decrease in the potential money supply because of the decrease in the required reserve
ratio is $_________2500____________.
