Bank Reserves
Bank Reserves
Suppose that the reserve ratio is .25, and that a bank has actual reserves of $15,000, loans of $40,000, and demand deposits of $50,000.
A. Excess reserves are $____________________.
B. This bank, being a single bank in a multibank system, can safely lend $____________________.
C. The multibank system can safely lend $__________________.
D. It is possible for the monetary base to increase by a total of $___________________. Assume now that the Fed lowers the reserve ratio to .20:
E. This bank, being a single bank in a multibank system, can now safely lend $_____________________.
F. The multibank system can safely lend $____________________.
G. It is now possible for the monetary base to increase by a total of $________________________.
H. The increase/decrease in the potential money supply because of the decrease in the required reserve ratio is $_____________________.
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This PowerPoint helps students to consider the concept of infinity.
Bank ReservesBank ReservesSuppose that the reserve ratio is .docx
1. Bank Reserves
Bank Reserves
Suppose that the reserve ratio is .25, and that a bank has actual
reserves of $15,000, loans of $40,000, and demand deposits of
$50,000.
A. Excess reserves are $____________________.
B. This bank, being a single bank in a multibank system, can
safely lend $____________________.
C. The multibank system can safely lend
$__________________.
D. It is possible for the monetary base to increase by a total of
$___________________. Assume now that the Fed lowers the
reserve ratio to .20:
E. This bank, being a single bank in a multibank system, can
now safely lend $_____________________.
F. The multibank system can safely lend
$____________________.
G. It is now possible for the monetary base to increase by a
total of $________________________.
H. The increase/decrease in the potential money supply because
of the decrease in the required reserve ratio is
$_____________________.
