Question
USING TOOK SOLUTIONS TO A AND -90 FOR ALA BALANCE SHEETS AND PROV Problem A Given a bank with no assets and no liabilities,
USING TOOK SOLUTIONS TO A AND -90 FOR ALA BALANCE SHEETS AND PROV Problem A Given a bank with no assets and no liabilities, update the balance sheet below assuming this bank receives $10,000,000 in deposits in "new money' from outside the country and the reserve ratio is .10. Balance sheet 1 ASSETS LIABILITIES & NET WORTH Required Reserves: Excess Reserves: Loans 30 Total: Demand Deposita Original: Total: $10,000,000 Now assume the bank makes a loan of $1,750,000 to a builder and loan of $250,000 to a small business. Assume the loans are deposited into the builder and small business checking accounts in the bank. The reserve ratio is still 10. Update the balance sheet below. Balance sheet 2 ASSETS Required Reserves: $1,200,000 Excess Reserves: Builder Loan: Small Business Loan: 1 LIABILITIES NET NORTH Demand Deposits Originali Builder: Small Business: $250,000 Total: $12,000,000 Total: Now assume that the builder and the small business withdraw all of their money from the bank. The reserve ratio is still.1. Update the balance sheet below Balance sheet 3 ASSETS Required Reserves: $1,000,000 Excess Reserves Builder Loan: Small Business Loan: Total: LIABILITIES & NET WORTH Demand Deposits Original: Builder Small Business Total $10,000,000 PROBLEM B Calculate how much the $10,000,000 in new money will cause the money atock (1) to grow. Use the formulat Change in ML Change in Excess Reserves (monetary multiplier)
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