By how much would the economys money supply increase

Reference no: EM13239305

suppose that the t-account for first national bank is as follows:
Assets liabilities
Reserve $100.000 Deposits $500.000
Loan 400.000
a. if the Fed requires banks to hold 5% of deposits as reserves, how much in excess reserves does First national now hold?
b. assume that all other banks hold only the required amount of reserves. if First national decides to reduce its reserves to only the required amount, by how much would the economy's money supply increase?

Reference no: EM13239305

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