Given the information from the first three images, how would I go about doing number 4 on this work sheet?
Grand Rapids College GRAND RAPIDS COMMUNITY COLLEGE EC 251 PRINCIPLES OF MACROECONOMICS THE MONEY MULTIPLIER PROJECT 4 During the fracking boom in Wherethehellami, ND, a construction company excavating the site for a new apartment complex to replace some of the "mancamps" that had been set up to house transient Oil Patch workers discovered a long-buried lockbox containing $5 mil in U.S. gold certificates, likely dating back to a long ago bank or train robbery. The certificates were exchanged for current U.S. legal tender and deposited by the construction company in its transaction account in the Wherethehellami branch of Fifth National Bank. Assume that the required reserve ratio is 20% and that there were no excess reserves in the banking system at the time at which the construction company made the deposit. Assume further that Wherethehellami branch of Fifth National Bank also held $2 million in securities at the time of the construction company deposit and its balance sheet was as follows: WHERETHEHELLAMI BRANCH, FIFTH NATIONAL BANK STARTING BALANCE SHEET ASSETS LIABILITIES TOTAL RESERVES DEPOSITS $60 Million REQUIRED $12.0 Million EXCESS SECURITIES $2 Million LOANS $46 Million TOTAL LIABILITIES $60 million TOTAL ASSETS $60 Million1. Use the T-account below to show how the deposit affected the balance sheet of Wherethehellami branch of Fifth National Bank. WHERETHEHELLAMI BRANCH, FIFTH NATIONAL BANK STEP 1: INITIAL DEPOSIT BY CONSTRUCTION COMPANY ASSETS LIABILITIES TOTAL RESERVES DEPOSITS $65 mil REQUIRED $13 mil EXCESS by mil SECURITIES $ 2 mil LOANS $ 46 mil TOTAL LIABILITIES $ 65 mil TOTAL ASSETS $ 65 mil2. Now that the Wherethehellami branch bank has excess reserves, it can make loans to local entrepreneurs to start small local businesses and to households to build proper houses to replace the single and double-wides that make up a significant portion of the local housing stock. What will the balance sheet of the Wherethehellami branch look like aer it fully utilizes is its lending capacity? (Assume there are no other banks for more than 200 miles in any direction, and the Wherethehellami branch can safely utilize its maximum lending capacity). WHERETHEHELLAMI BRANCH, FIFTH NATIONAL BANCH STEP 2: LAST NATIONAL FULLY UTILIZES IT LENDiNG CAPACITY ASSETS LIABILITIES ( TOTAL RESERVES DEPOSITS $ML \\ REQUIRED Sm EXCESS O SECURITIES i 7. m'\\\\ LOANS M TOTAL LIABILITIES {Ml TOTAL ASSETS $ 95 mil 3. Answer the following questions: a. By how much did the money supply increase as a result of the construction company's initial deposit? b. By how much did the initial deposit change Last National's total, required and excess reserves? How much did the Wherethehellami branch bank's lending activity add to the increase in the money supply? .0 4. Suppose now that the required reserve ratio increases from 20% to 25%. How much will the money supply change? What will happen to the Wherethehellami branch of Fifth National Bank balance sheet? What will the Wherethehellami Branch have to do to balance its position? WHERETHEHELLAMI BRANCH, FIFTH NATIONAL BANK STEP 4: THE REQUIRED RESERVE RATIO INCREASES ASSETS LIABILITIES TOTAL RESERVES DEPOSITS REQUIRED EXCESS SECURITIES LOANS TOTAL LIABILITIES TOTAL ASSETS STEP 4: THE REQUIRED RESERVE RATIO INCREASES (After Wherethehellami branch fixes the problem) ASSETS LIABILITIES TOTAL RESERVES DEPOSITS REQUIRED EXCESS SECURITIES LOANS TOTAL LIABILITIES TOTAL ASSETS
