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Problem 3: Liabilities Assets Deposits $180,000 $19,800 160,200 Reserves Loans a. If the Bank of Springfield has lent out all the money it can give its level of deposits, then what is the reserve requirement? Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier? b. c. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold? Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase d.

Problem 3: Liabilities Assets Deposits $180,000 $19,800 160,200 Reserves Loans a. If the Bank of Springfield has lent out all the money it can give its level of deposits, then what is the reserve requirement? Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier? b. c. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold? Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase d.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
Problem 10PA
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Problem 3: Liabilities Assets Deposits $180,000 $19,800 160,200 Reserves Loans a. If the Bank of Springfield has lent out all the money it can give its level of deposits, then what is the reserve requirement? Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier? b. c. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold? Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase d.
Transcribed Image Text:Problem 3: Liabilities Assets Deposits $180,000 $19,800 160,200 Reserves Loans a. If the Bank of Springfield has lent out all the money it can give its level of deposits, then what is the reserve requirement? Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier? b. c. If the Fed requires a reserve ratio of 6 percent, then what quantity of excess reserves does the Bank of Springfield now hold? Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase d.
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