Suppose that the reserve ratio is .25, and that a bank has actual reserves of $15,000, loans
Question:
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 $_____________.
Expert Answer:
