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Please do the parts not filled! Thanks DEPOSIT CREATION BY DEPOSITORY INSTITUTIONS INCREASE THE MONEY SUPPLY (16 Marks) The T-Accounts in this table show how
Please do the parts not filled! Thanks
DEPOSIT CREATION BY DEPOSITORY INSTITUTIONS INCREASE THE MONEY SUPPLY (16 Marks) The T-Accounts in this table show how a $7,750 Ms. Aby deposited in her account at Bank A changed the Bank's balance sheet and, subsequently, the balance sheets of other depository institutions. Assume that all depository institutions keep 4 percent target (desired) reserve ratio (ie. V = 0.04) and quickly loan out excess reserves (.e. keep zero excess reserves), and the public does not hold part of their deposits in cash (i.e. no cash drain). Calculate your answers to the nearest dollar: BANKA Assets Liabilities Reserves: 7,750 Deposits: 7,750 Loans: 0 Part 1: Assume that Bank A lends its excess reserves to Mr. Jones. Show Bank A's new balance sheet BANKA Assets Liabilities a) Reserves 310 b) Deposits 7750 c) Loans 7440 Part 2: Suppose Mr. Jones spend all the money borrowed, and his creditor(s) deposit their revenues at Bank B. Bank B lends its excess reserves to Ms. Davis. Show Bank B's balance sheet after the loan has been made out. BANK B Assets Liabilities a) Reserves 210 b) Deposits 340 c) Loans 0 Part 3: Suppose Ms. Davis spends all the money borrowed, and her creditor(s) deposit thier revenues at Bank C. Bank C lends its excess reserves to Mr. Watson. Show Bank C's balance sheet after the loan has been made out. BANK C Assets Liabilities a) Reserves Number b) Deposits Number c) Loans Number Part 4: Mr. Watson spends all the money he borrowed, and his creditor(s) deposit their revenues at Bank D. Bank D lends its excess reserves to Ms. Gresham. Show Bank D's balance sheet after the loan has been made out. BANKD Assets Liabilities a) Reserves Number b) Deposits Number c) Loans Number Part 5: Calculate the total deposits in all depository institutions as a result of Ms. Aby's original $7,750 deposit, the total loans these institutions have extended, and the total amount added to their reserves when the above process continues to completion: a) Credit (or deposit) multiplier Number b) Total Deposits Number C) Total Reserves Number d) Total Loans Number DEPOSIT CREATION BY DEPOSITORY INSTITUTIONS INCREASE THE MONEY SUPPLY (16 Marks) The T-Accounts in this table show how a $7,750 Ms. Aby deposited in her account at Bank A changed the Bank's balance sheet and, subsequently, the balance sheets of other depository institutions. Assume that all depository institutions keep 4 percent target (desired) reserve ratio (ie. V = 0.04) and quickly loan out excess reserves (.e. keep zero excess reserves), and the public does not hold part of their deposits in cash (i.e. no cash drain). Calculate your answers to the nearest dollar: BANKA Assets Liabilities Reserves: 7,750 Deposits: 7,750 Loans: 0 Part 1: Assume that Bank A lends its excess reserves to Mr. Jones. Show Bank A's new balance sheet BANKA Assets Liabilities a) Reserves 310 b) Deposits 7750 c) Loans 7440 Part 2: Suppose Mr. Jones spend all the money borrowed, and his creditor(s) deposit their revenues at Bank B. Bank B lends its excess reserves to Ms. Davis. Show Bank B's balance sheet after the loan has been made out. BANK B Assets Liabilities a) Reserves 210 b) Deposits 340 c) Loans 0 Part 3: Suppose Ms. Davis spends all the money borrowed, and her creditor(s) deposit thier revenues at Bank C. Bank C lends its excess reserves to Mr. Watson. Show Bank C's balance sheet after the loan has been made out. BANK C Assets Liabilities a) Reserves Number b) Deposits Number c) Loans Number Part 4: Mr. Watson spends all the money he borrowed, and his creditor(s) deposit their revenues at Bank D. Bank D lends its excess reserves to Ms. Gresham. Show Bank D's balance sheet after the loan has been made out. BANKD Assets Liabilities a) Reserves Number b) Deposits Number c) Loans Number Part 5: Calculate the total deposits in all depository institutions as a result of Ms. Aby's original $7,750 deposit, the total loans these institutions have extended, and the total amount added to their reserves when the above process continues to completion: a) Credit (or deposit) multiplier Number b) Total Deposits Number C) Total Reserves Number d) Total Loans NumberStep by Step Solution
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