Answer the following questions: Question One: (3 points) Assume that the LRR of the banking system =15%. Assume that an individual withdraws $ 180 million of Bank (A). a. Construct the balance sheet of Bank (A). State the effect of this transaction on Bank (A) (1 point) b. Construct the Consolidated Balance Sheet of the Banking system. State the effect of this transaction on the Banking System (1 point) c. What is the effect of the above transaction on the M-SS of the economy; explain the effect in words and numbers. (1 point) Question Two: (1.5 points) Suppose that the Central Bank sets the reserve requirement at 14%. Study the effect of $ 70 million cash deposited into NPL Bank. However the banking sector chooses to hold $65 million in its vaults for its daily operations such as deposit withdrawals and loan requests. Study the effect of this transaction-taking into consideration the decision made by the banking sector- on the Consolidated Balance Sheet of the Banking system. Construct the Consolidated Balance Sheet of the Banking sector. (1.5 point) Question Three: (3.25 points) ABC Company deposits a check in the amount of $850,000 in its DD Deposit at Bank (X). Assume LRR = 16% a. Construct the balance sheet of Bank (X) and the Consolidated Balance sheet of the banking system. State the effect of this transaction on Bank (A) and the Banking System (1.5 points) b. Calculate the M-SS multiplier. (0.75 point) c. Calculate the effect on M-Ss of the economy and state the effect on M-SS. (1 point) Answer the following questions: Question One: (3 points) Assume that the LRR of the banking system =15%. Assume that an individual withdraws $ 180 million of Bank (A). a. Construct the balance sheet of Bank (A). State the effect of this transaction on Bank (A) (1 point) b. Construct the Consolidated Balance Sheet of the Banking system. State the effect of this transaction on the Banking System (1 point) c. What is the effect of the above transaction on the M-SS of the economy; explain the effect in words and numbers. (1 point) Question Two: (1.5 points) Suppose that the Central Bank sets the reserve requirement at 14%. Study the effect of $ 70 million cash deposited into NPL Bank. However the banking sector chooses to hold $65 million in its vaults for its daily operations such as deposit withdrawals and loan requests. Study the effect of this transaction-taking into consideration the decision made by the banking sector- on the Consolidated Balance Sheet of the Banking system. Construct the Consolidated Balance Sheet of the Banking sector. (1.5 point) Question Three: (3.25 points) ABC Company deposits a check in the amount of $850,000 in its DD Deposit at Bank (X). Assume LRR = 16% a. Construct the balance sheet of Bank (X) and the Consolidated Balance sheet of the banking system. State the effect of this transaction on Bank (A) and the Banking System (1.5 points) b. Calculate the M-SS multiplier. (0.75 point) c. Calculate the effect on M-Ss of the economy and state the effect on M-SS. (1 point)
