Q-1 Suppose that the T-account for Sovereign Bank is as follows and the reserve requirements ratio is 20% ASSETS Cash Reserves Loans $ 1,000 $ 4,000 $ 5,000 LIABILITIES Demand Deposits $5,000 $5,000 a) What is the size of the money multiplier? b) With the present required ratio how much total money banking system can create?

Q-1 Suppose that the T-account for Sovereign Bank is as follows and the reserve requirements ratio is 20% ASSETS Cash Reserves Loans $ 1,000 $ 4,000 $ 5,000 LIABILITIES Demand Deposits $5,000 $5,000 a) What is the size of the money multiplier? b) With the present required ratio how much total money banking system can create?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 3.5P

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