Question
The following table shows the assets and liabilities of all banks in Canada.The reserve ratio is 8%, and no one holds cash. Assets Liabilities Actual
The following table shows the assets and liabilities of all banks in Canada.The reserve ratio is 8%, and no one holds cash.
Assets
Liabilities
Actual reserves:$200 million
Loans:$700 million
Bonds:$100 million
Deposits:$1 000 million
a)What is the amount of totaldesiredreserves?What is the amount ofexcessreserves?
b)What is the multiplier?Show how you figured it out.
c)After all the multiplier processes have taken place, what will be the change in loans?
d) When all of the excess reserves are loaned out, how will the above table have changed?
e)Now suppose people wish to hold 40% of their deposits as cash.What impact will that have on the money creation process and the multiplier?Explain in words - calculations aren't necessary.
answer with explanations please
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