Chapter 16 probs and apps

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Chapter 16 3. Your uncle repays a $100 loan from Tenth National Bank (TNB) by writing a $100 check from his TNB checking account. Use T-accounts to show the effect of this transaction on your uncle and on TNB. Has your uncle’s wealth changed? Explain. Before transaction T accounts Uncle Assets Liabilities Checking acc 100$ loans 100$ Tenth National Bank Assets Liabilities Checking acc 100$ loans 100$ After Transaction T accounts Uncle Assets Liabilities Checking acc 0$ loans 0$ Tenth National Bank Assets Liabilities Checking acc 0$ loans 0$ My uncle’s wealth remains unchanged because his wealth was O after the payment of the loan shown by the asset and liabilities t accounts above. 7. The Fed conducts a $10 million open-market purchase of government bonds. If the required reserve ratio is 10 percent, what are the largest and smallest possible increases in the money supply that could result? Explain. The largest possible increase in money supply is $100 million (10 mil x 10). The smallest possible increase in money supply is 10 million if the money is kept by the banks.
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