Suppose the initial cash in an economy (there is no government, but just a central bank and banks initially have not borrowed a single dime from CB since the discount rate is around zero) is $500 Mil. Individuals tend to keep one-fourth of their income as cash and deposit the rest. Banks can lend 85 percent of the deposit and reserve the remaining, then: What is the total money supply in this economy? If the reserve ratio decreases by 75%, what is the new money supply? Now, if, given the new situation, individuals hold one-third of their income as cash, what would be the money supply? What are leverage ratio and insolvency? Below is the information for Bank A & B: A: reserves $2 Billion, Loans=S15 Billion, Securities=$4 Billion, deposits $17 Billion, debt-$2 billion. B: reserves=$700 million, Loans=$4 Billion, Securities--$2 billion, deposits-$5 Billion, debt-$1 billion What are their leverage ratios? If their assets fall by 10%, which bank would be insolvent? Show your work. Calculate (find) Leverage Ratios for Chase, Bank of America, and PNC (total aseests and owners' equity [capital]). In which of those you deposit your money? Why