Question
Problem 17-10 (Algo) Suppose the simplified consolidated balance sheet shown below is for the entire commercial banking system and that all figures are in billions
Problem 17-10 (Algo) Suppose the simplified consolidated balance sheet shown below is for the entire commercial banking system and that all figures are in billions of dollars. The reserve ratio is 25 percent. Instructions: All answers to this question should be entered as whole numbers. Assets Liabilities and net worth 1 (a) (b) 1' (a) (b) Reserves $54 $ $ Checkable deposits $200 $ $ Securities 46 $ $ Loans 100 $ $ a. What is the amount of excess reserves in this commercial banking system? $ billion What is the maximum amount the banking system might lend? $ billion Show in columns 1(a) and 1'(a) how the consolidated balance sheet would look after this amount has been lent. What is the size of the monetary multiplier? b. Answer the questions in part a assuming the reserve ratio is 20 percent. What is the amount of excess reserves in this commercial banking system? $ billion What is the maximum amount the banking system might lend? $ billion Show in columns 1(b) and 1'(b) how the consolidated balance sheet would look after this amount has been lent. What is the monetary multiplier?
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