Question: You live in a world with a universal 8.5% required reserve rate for all depository institutions. Assume the police take the $300,000 found in Whitey
You live in a world with a universal 8.5% required reserve rate for all depository institutions. Assume the police take the $300,000 found in Whitey Bolgers walls and deposits the cash back in the banking system (an example of forced dishoarding). A) What will the change in the banks T-account look like immediately after the deposit? B) Assuming the bank wants no excess reserves, what would its T-account look like after it loans out the excess reserves from the first $300,000 deposit? C) What would be the ending T-account if no bank held excess reserves (following the $300,000 deposit)? (Note: follow the same process used in class.)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
