On the island of Marbella there are three banks: Bank A, Bank B, and Bank C. Under Marbella's banking regulations, all banks are required to hold at least 8% of their deposits as reserves. Amos, an inhabitant of Marbella, has $15,000. Previously he had held all of it in cash at home, but he now decides to deposit it all in Bank A. Bank A decides to loan the maximum allowable amount to Amos' neighbor, Barbara, who has a business idea that she needs funding for. When Barbara receives her loan she immediately deposits all of it in Bank B. Bank B then loans the maximum possible amount to Carla, who needs the money for her own business idea. When Carla receives the loan she immediately deposits all of it into Bank C. a. Fill in the T-Accounts in Figure I to show the assets and liabilities of Amos, Barbara, Carla and Banks A, B, and C after all of the transactions described above have taken place. Each entry in the T-accounts should specify both (i) the particular type of asset or liability and (ii) the dollar amount of that asset or liability. Round your answers to the nearest dollar. (Hint: All of the assets and liabilities in this part will be either "Deposits", "Loans", or "Reserves") b. Before Amos deposited his money into Bank A, what was the money supply in Marbella? Explain your answer. (Assume that there is no money in Marbella beyond what is described above.) For full credit you must provide a number and explain how you arrived at it. c. What was the money supply in Marbella after all of the transactions described above have taken place? For full credit you must provide a number and explain how you arrived at it. Figure 1. T-Accounts for Marbella AMOS BANKA Assets Liabilities Assets Liabilities BARBARA BANKB Assets Liabilities Assets Liabilties CARLA BANKC Assets Liabilities Assets Liabilities On the island of Marbella there are three banks: Bank A, Bank B, and Bank C. Under Marbella's banking regulations, all banks are required to hold at least 8% of their deposits as reserves. Amos, an inhabitant of Marbella, has $15,000. Previously he had held all of it in cash at home, but he now decides to deposit it all in Bank A. Bank A decides to loan the maximum allowable amount to Amos' neighbor, Barbara, who has a business idea that she needs funding for. When Barbara receives her loan she immediately deposits all of it in Bank B. Bank B then loans the maximum possible amount to Carla, who needs the money for her own business idea. When Carla receives the loan she immediately deposits all of it into Bank C. a. Fill in the T-Accounts in Figure I to show the assets and liabilities of Amos, Barbara, Carla and Banks A, B, and C after all of the transactions described above have taken place. Each entry in the T-accounts should specify both (i) the particular type of asset or liability and (ii) the dollar amount of that asset or liability. Round your answers to the nearest dollar. (Hint: All of the assets and liabilities in this part will be either "Deposits", "Loans", or "Reserves") b. Before Amos deposited his money into Bank A, what was the money supply in Marbella? Explain your answer. (Assume that there is no money in Marbella beyond what is described above.) For full credit you must provide a number and explain how you arrived at it. c. What was the money supply in Marbella after all of the transactions described above have taken place? For full credit you must provide a number and explain how you arrived at it. Figure 1. T-Accounts for Marbella AMOS BANKA Assets Liabilities Assets Liabilities BARBARA BANKB Assets Liabilities Assets Liabilties CARLA BANKC Assets Liabilities Assets Liabilities
