Calculate total change in money supply resulting

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Reference no: EM1371307

Q. Suppose Bank A, which faces a reserve requirement of 10 percent, receives a $1000 deposit from a customer.

a. Assuming that it wishes to hold no excess reserves, determine Explain how much bank should lend. Explain how your answer on Bank A's balance sheet.

b. Assuming that loan Explain how in Bank A's balance sheet is redeposit in Bank B, Explain how changes in Bank B's balance sheet if it lends out maximum possible.

c. Repeat this process for three additional banks: C, D and E.

d. Using simple money multiplier, calculate total change in money supply resulting from $1000 initial deposit.

e. Assume Banks A, B, C, D and E each wish to hold 5 percent excess reserves. Explain how would hold this level of excess reserves affect total change in money supply?

Reference no: EM1371307

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