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Balance Sheet for Ecoville International Bank ASSETS LIABILITIES Cash $33,000 Demand Deposits $99,000 Loans 66,000 Now assume that the Fed lowers the reserve requirement to
Balance Sheet for Ecoville International Bank | |||
ASSETS | LIABILITIES | ||
Cash | $33,000 | Demand Deposits | $99,000 |
Loans | 66,000 |
Now assume that the Fed lowers the reserve requirement to 8%.
- What is the maximum amount of new loans that this bank can make?
- Assume that the bank makes these loans. What will the new balance sheet look like?
- By how much has the money supply increased or decreased?
- If the money multiplier is 5, how much money will ultimately be created by this event?
- If the Fed wanted to implement a contractionary monetary policy using reserve requirements, how would that work?
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Inflation, Unemployment And Capital Malformations
Authors: Bernard Schmitt, Xavier Bradley, Alvaro Cencini
1st Edition
0429767064, 9780429767067
