Question
Bank A is the only bank in the country of Sunny-weather. The total amount of cash held by the public in Sunny-weather is $4,000. Initially,
Bank A is the only bank in the country of Sunny-weather. The total amount of cash held by the public in Sunny-weather is $4,000. Initially, Bank As balance sheet is below. (There are no other holdings of assets or liabilities than those listed):
ASSETS | LIABILITES |
Reserves $ 2,500 | Checking Deposits $ 6,000 |
Loans $ 5,500 | Net Worth ? |
Total ? | Total ? |
5a. Complete Bank As balance sheet.
5b. Compute the money supply in Sunny-weather.
5c. How much is the reserve required ratio in Sunny-weather if Bank A holds only required reserves? Round your answer to two decimal places, and show your work.
5d. Assume instead that the required reserve ratio (R) is 10%. What dollar amount does Bank A have to hold as required reserves? Is Bank A holding excess reserves? How much?
5e. Based on total reserves of $2,500 (and checking deposits of $6,000), compute the money multiplier in Sunny-weather.
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