Assume Bank of America has excess reserves of $30 million and checking deposits of $180 million. If the reserve ratio is 10%, what is the size of Bank of America's reserves? b. To increase aggregate demand, what type of monetary policy (expansion and contractionary) would the Fed adopt?
Assume Bank of America has excess reserves of $30 million and checking deposits of $180 million. If the reserve ratio is 10%, what is the size of Bank of America's reserves? b. To increase aggregate demand, what type of monetary policy (expansion and contractionary) would the Fed adopt?
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter12: Money, Banking And The Financial System
Section: Chapter Questions
Problem 4WNG
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Assume Bank of America has excess reserves of $30 million and checking deposits of $180 million. If the reserve ratio is 10%, what is the size of Bank of America's reserves?
b. To increase aggregate demand , what type of monetary policy (expansion and contractionary) would the Fed adopt?
Expert Solution
Step 1
Accourding to Question___
Excess Reserves =$30 million
Outstanding deposit =$180 million
Reserve ratio= 10%
Required Reserve =Reserve ratio x Outstanding deposit
= 10% of 180
= $18Million
Total reserve of Bank of America's =Required Reserve +Excess Reserves
= 30+18
=$48Million
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