II. PROBLEM: HOW BANKS CREAD Open with Assume that a Php 100 is deposited in the Alpha National Bank. Use the balance sheets of banks to see the effects (all figures are in billion pesos). Given: RRR (Required Reserve Ratio) = 20% ER = Excess Reserves Alpha National Bank - ANB Beta National Bank = BNB Delta National Bank = DNB Initially, all banks have no excess reserves. Loans made by banks are equal to their excess reserves A cash of Php100 is deposited in a checking account (DD) at ANB. You have to show the changes in each bank's balance sheets as a result of this P10 cash deposit and the banks' Increased ability to make loans. 1. Round One Step 1: Php 100 (billion) is deposited in ANB Alpha National Bank Assets Liabilities and Net Worth Reserves Demand Deposits Required Excess Step 2: ANB makes loans equal to its excess reserves Alpha National Bank Assets Liabilities and Net Worth Reserves Demand Deposits 100 100 Required Demand Deposits Excess Loan Page 113 - Q + Stan 7. The laonleunert mauve devastada DNR and traveler Excess Open with Loan Step 3: The loan is spent, now deposited at BNB, and the check clears. Alpha National Bank Assets Liabilities and Net Worth Reserves Demand Deposits 100 Required Demand Deposits Excess Loan 80 2. Round Two Step 1: The check from round one is deposited in BNB Beta National Bank Assets Liabilities and Net Worth Reserves Demand Deposits Required Excess Step 2: Loan is made by BNB equal to its excess reserves Beta National Bank Assets Liabilities and Net Worth Reserves Demand Deposits 80 Required Demand Deposits Excess 80 Loan Step 3: The loan is spent, now deposited at DNB, and the check clears. Assets Beta National Bank Liabilities and Net Worth Reserves Demand Deposits 80 Required Demand Deposits Excess Loan 64 3. Round Three Step 1: The check from round two is deposited in DNB Delta National Bank Assets Liabilities and Net Worth Reserves Demand Deposits Required Excess Answer the following questions: 1. How much money was created in round one? 2. How much money was created in round two? 3. How much money can be created in round three? 4. What is the money multiplier? Interpret the result. 5. What is the maximum total increase in the money supply that can occur as a result of the initial P100 cash deposit? II. PROBLEM: HOW BANKS CREAD Open with Assume that a Php 100 is deposited in the Alpha National Bank. Use the balance sheets of banks to see the effects (all figures are in billion pesos). Given: RRR (Required Reserve Ratio) = 20% ER = Excess Reserves Alpha National Bank - ANB Beta National Bank = BNB Delta National Bank = DNB Initially, all banks have no excess reserves. Loans made by banks are equal to their excess reserves A cash of Php100 is deposited in a checking account (DD) at ANB. You have to show the changes in each bank's balance sheets as a result of this P10 cash deposit and the banks' Increased ability to make loans. 1. Round One Step 1: Php 100 (billion) is deposited in ANB Alpha National Bank Assets Liabilities and Net Worth Reserves Demand Deposits Required Excess Step 2: ANB makes loans equal to its excess reserves Alpha National Bank Assets Liabilities and Net Worth Reserves Demand Deposits 100 100 Required Demand Deposits Excess Loan Page 113 - Q + Stan 7. The laonleunert mauve devastada DNR and traveler Excess Open with Loan Step 3: The loan is spent, now deposited at BNB, and the check clears. Alpha National Bank Assets Liabilities and Net Worth Reserves Demand Deposits 100 Required Demand Deposits Excess Loan 80 2. Round Two Step 1: The check from round one is deposited in BNB Beta National Bank Assets Liabilities and Net Worth Reserves Demand Deposits Required Excess Step 2: Loan is made by BNB equal to its excess reserves Beta National Bank Assets Liabilities and Net Worth Reserves Demand Deposits 80 Required Demand Deposits Excess 80 Loan Step 3: The loan is spent, now deposited at DNB, and the check clears. Assets Beta National Bank Liabilities and Net Worth Reserves Demand Deposits 80 Required Demand Deposits Excess Loan 64 3. Round Three Step 1: The check from round two is deposited in DNB Delta National Bank Assets Liabilities and Net Worth Reserves Demand Deposits Required Excess Answer the following questions: 1. How much money was created in round one? 2. How much money was created in round two? 3. How much money can be created in round three? 4. What is the money multiplier? Interpret the result. 5. What is the maximum total increase in the money supply that can occur as a result of the initial P100 cash deposit
