1. In the hypothetical country of Westlandia, banks are required to hold 20% of checkable deposits as reserves, and the public holds 50% of the loans as currency in circulation and redeposits the remaining 50% percent of the loans.

a. Complete the table (calculations should be to no more than two decimal places).

Round

Deposits

Required Reserves of 20%

Excess Reserves

New Loans

50% of loan proceeds are held as currency in circulation by people

Loan proceeds redeposited

1

$500

2

3

4

5

6

7

8

9

10

Totals

b. Calculate the new money supply.

c. Calculate the money multiplier

2. In the hypothetical country of Middlelandia, banks are required to hold 20% of checkable deposits as reserves, and the public holds none of the loans as currency in circulation and redeposits all of the loans.

a. Complete the table (calculations should be to no more than two decimal places).

Round

Deposits

Required Reserves of 20%

Excess Reserves

New Loans

None of loan proceeds are held as currency in circulation by people

Loan proceeds redeposited

1

$500

2

3

4

5

6

7

8

9

10

Totals

b. Calculate the new money supply.

c. Calculate the money multiplier.

3. In the hypothetical country of Eastlandia, banks are required to hold 10% of checkable deposits as reserves, and the public holds none of the loans as currency in circulation and redeposits all of the loans.

a. Complete the table (calculations should be to no more than two decimal places).

Round

Deposits

Required Reserves of 10%

Excess Reserves

New Loans

None of loan proceeds are held as currency in circulation by people

Loan proceeds redeposited

1

$500

$

$

$

$0

$450

2

$

$

$

$

$0

$405

3

$

$

$

$

$0

$

4

$

$

$

$

$0

$

5

$

$

$

$

$0

$

6

$

$

$

$

$0

$

7

$

$

$

$

$0

$

8

$

$

$

$

$0

$

9

$

$

$

$

$0

$

10

$

$

$

$

$0

$

Totals

$

$

$

$

$0

$

b. Calculate the new money supply.

c. Calculate the money multiplier.