Question
Assume that RRR=20% and the following transactions happens in the given order: i. Central Bank buys T-bonds from Bank A in the value of $8000.
Assume that RRR=20% and the following transactions happens in the given order:
i. Central Bank buys T-bonds from Bank A in the value of $8000.
ii. Bank A lends $6000 to Jim.
iii. Jim deposits $5000 in Bank B.
iv. Bank B lends $4000 to Sherry.
v. Sherry deposits $3000 to Bank C and Bank C keeps all proceedings in the reserves.
a. Calculate the change in required reserves in the banking sector as a result of actions i-v.
b. Calculate the change in excess reserves in the banking sector as a result of actions i-v.
c. Calculate the change in deposits in the banking sector as a result of actions i-v.
d. Calculate the change in cash in circulation as a result of actions i-v.
e. Calculate the change in monetary base as a result of actions i-v.
f. Calculate the change in money supply (M1) as a result of actions i-v.
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