1 A banking system is described below. All $millions. All banks keep a reserve ratio of 20%. [25]Assets Reserves 14.4 Loans 125 Liabilities DemandDeposits 80 Equity Property 59.4 Assume a new$8 million deposit is made from outside thebanking system – possibly from another country.1.1 Calculate the value of excess reserves, if any,after the new deposit is made. 1.2 Calculate thevalue of the money multiplier in this system. 1.3Calculate the amount of new money the bankingsystem can generate in new loans.

banking system – possibly from another country. 1.1 Calculate the value of excess reserves, if any, after the new deposit is made. 1.2 Calculate the value of the money multiplier in this system. 1.3 Calculate the amount of new money the banking system can generate in new loans.

banking system – possibly from another country. 1.1 Calculate the value of excess reserves, if any, after the new deposit is made. 1.2 Calculate the value of the money multiplier in this system. 1.3 Calculate the amount of new money the banking system can generate in new loans.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter15: Money Creation

Section: Chapter Questions

Problem 15SQ

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Question

1 A banking system is described below. All $
millions. All banks keep a reserve ratio of 20%. [25]
Assets Reserves 14.4 Loans 125 Liabilities Demand
Deposits 80 Equity Property 59.4 Assume a new
$8 million deposit is made from outside the
banking system – possibly from another country.
1.1 Calculate the value of excess reserves, if any,
after the new deposit is made. 1.2 Calculate the
value of the money multiplier in this system. 1.3
Calculate the amount of new money the banking
system can generate in new loans.

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