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Consider a new deposit to the Canadian banking system of $7,500. Suppose that all commercial banks have a target reserve ratio (v) of 5 percent
Consider a new deposit to the Canadian banking system of $7,500. Suppose that all commercial banks have a target reserve ratio (v) of 5 percent and there is no cash drain. a. The first round has been completed in the table below. Now, recalling that the new loans in the first round become the new deposits in the second round, complete the table. {Round your responses to the nearest dollar. if you have rounded a number and need to use it in another calculation, you should use this rounded value. For example, if the new loans in the second round are found to be $1,255. 75 and rounded to $1,256, then if at some later point you need to use this value, you should use $1,255, not $1,255, 75. ) Round A in Deposits AReserves ALoans First $7,500 $375 $7,125 Second 5 $ $ Third $ $ $ Fourth 5 3 $ b. You have now completed the rst four rounds of the deposit-creation process. The total change in de osits so far as a result of the single new deposit is S . {Round your response to the nearest dollar. Use the rounded numbers from the table above.) c. The deposit-creation process could go on forever, but it would sti have a nite sum. The eventual total change in deposits is equal to llv times the new deposit, where v is the target reserve ratio. in this case the eventual total change in deposits is equal to S . (Round your response to the nearest dollar) d. The eventual total change in reserves is equal to $ and the eventual total change in loans is equal to S . (Round your responses to the nearest dollar)
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