Central bank changes the reserve requirement ratio

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Reference no: EM138907

Q. 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

Show that the balance sheet balances if these are the only assets and liabilities.

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? How much does the money supply change by?

Reference no: EM138907

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ery8907

10/19/2016 9:31:44 AM

Accepting that individuals hold no cash, what happens to each of these qualities if the national bank changes the save necessity proportion to 3%, banks still need to hold a similar rate of overabundance saves, and banks don't change their property of Treasury securities? What amount does the cash supply change by?

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