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Ben deposits $100,000 in Bank A and Justin borrows $80,000 from Bank A to buy a car from a dealership. The car dealer deposits the
Ben deposits $100,000 in Bank A and Justin borrows $80,000 from Bank A to buy a car from a dealership. The car dealer deposits the 80,000 at Bank B. Assume that there is no currency drain and the desired reserve ratio is 20%.
- Reflect the above transactions in T-accounts for both banks
- The Central Bank noticed that commercial banks are expanding money supply too much. Would the Central Bank increase or decrease the desired reserve ratio? Please provide your answer with detailed explanation.
- At the end of the day, the manager of Bank A found that they had a surplus of $10,000 in the LVTS (Large Value Transfer System), and decided not to make any changes to it. If the target overnight rate is 0.25%, how much would the Central Bank charge or pay Bank A?
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