Assume that the reserve requirement ratio is 20 percent. Calculate the dollar value of the reserves that the Bank of Uchenna is required to hold. Given the current reserves, calculate the maximum value of additional loans that the Bank of Uchenna can make. Assume that Elike raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of Uchenna. By how much does the money supply immediately change as a result of Elike’s deposit? Calculate the maximum change in demand deposits in the banking system as a whole resulting from Elike’s deposit. If the Bank of Uchenna is not meeting its reserve requirement, what action can it take to meet the reserve requirement without calling in loans or selling property?

Assume that the reserve requirement ratio is 20 percent. Calculate the dollar value of the reserves that the Bank of Uchenna is required to hold. Given the current reserves, calculate the maximum value of additional loans that the Bank of Uchenna can make. Assume that Elike raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of Uchenna. By how much does the money supply immediately change as a result of Elike’s deposit? Calculate the maximum change in demand deposits in the banking system as a whole resulting from Elike’s deposit. If the Bank of Uchenna is not meeting its reserve requirement, what action can it take to meet the reserve requirement without calling in loans or selling property?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 5E

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