Question 2 (4 marks): Imagine a system with just three commercial banks, A. B and C, whose balance sheets are shown below. Bank A Bank B Bank C A A A G=20 D=2000 L D-2000 D=2000 C-20 D80 D = 80 G-20 D = 80 BL, 1900 BL 1900 BL, 1900 Where D, are customers' deposits, C, is cash (notes and coin) held by banks, D, are banks' deposits at the central bank and BL, are loans to the non-bank public. Bank reserves, R, consist of C, + D, and a bank's reserve ratio is thus /p, Assume that non-banks hold 1000 in notes and coin (C). 1. what is the size of the money stock, C + D 2. Calculate the reserve ratio for each bank and for the system as a whole Suppose now that bank A increases its loans (BL,) by 20 and that its customers use this leading to pay 10 to clients of bank B and 10 to clients of bank C. 3. Show the new balance sheet position for each bank. 4. By how much has the money supply increased? 5. Calculate the new reserve ratio for each individual bank and the aggregate reserve ratio, & Link FuroN-ASB GIAY THI HUU Ma SV Lop tin chis Ngy thinh 65 218 ong thi: 4705 200508 AMID Question 2 (4 marks): Imagine a system with just three commercial banks, A. B and C, whose balance sheets are shown below. Bank A Bank B Bank C A A A G=20 D=2000 L D-2000 D=2000 C-20 D80 D = 80 G-20 D = 80 BL, 1900 BL 1900 BL, 1900 Where D, are customers' deposits, C, is cash (notes and coin) held by banks, D, are banks' deposits at the central bank and BL, are loans to the non-bank public. Bank reserves, R, consist of C, + D, and a bank's reserve ratio is thus /p, Assume that non-banks hold 1000 in notes and coin (C). 1. what is the size of the money stock, C + D 2. Calculate the reserve ratio for each bank and for the system as a whole Suppose now that bank A increases its loans (BL,) by 20 and that its customers use this leading to pay 10 to clients of bank B and 10 to clients of bank C. 3. Show the new balance sheet position for each bank. 4. By how much has the money supply increased? 5. Calculate the new reserve ratio for each individual bank and the aggregate reserve ratio, & Link FuroN-ASB GIAY THI HUU Ma SV Lop tin chis Ngy thinh 65 218 ong thi: 4705 200508 AMID