Determine what will the new level of reserves

Reference no: EM13239879

the T-account for First City Bank, the only bank in a small economy. In addition to the bank deposits of $500,000, citizens hold $200,000 in coins and currency.

Assets Liabilities

Reserves $100,000 Deposits $500,000
Loans $400,000

a. Assume the bank has made all the loans it would like to make. What is the bank's desired reserve ratio?
b. If people deposit $50,000 of their currency in accounts at the First City Bank, what will the new level of reserves be before the bank makes any new loans?
c. What is the money multiplier equal to?

Reference no: EM13239879

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