CENGAGE |MINDTAP Monetary Policy Back to Assignment Attempts. Average: /4 2. Working through a change in the reserve requirement Assume that the following table portrays the balance sheet of First Southern bank. Assets Liabilities and Net Worth Vault Cash $100,000 Deposits $950,000 Deposits at Fed $150,000 Loans $700,000 Total $950,000 Total $950,000 First Southern's bank reserves are equal to s If the Federal Reserve sets the required reserve ratio to 0.05, First Southern's required reserves would be $ Therefore, it would have s in excess reserves, If First Southern loaned all of its excess reserves, the maximum amount by which the money supply could subsequently increase is S If the Fed were instead to set the required reserve ratio to 0.10, required reserves would be FINI excess reserves would be 5 and the maximum increase in the money supply would be BE The In the money supply will be larger if the Fed chooses a required e ratio of Grade It Now Save & Continue Continue without saving