By how much does the money supply change

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Reference no: EM13200143

Suppose a country the total holdings of banks were as follows:
required reserves = $45 million excess reserves = $15 million
deposits = $750 million loans = $600 million
Treasury bonds = $90 million
(a) Show that the balance sheet balances if these are the only assets and liabilities.

(b) Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 3%, banks still want to hold the same percentage of excess reserves, and banks don't change their holdings of Treasury bonds?

Reference no: EM13200143

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