Find actual reserves-required reserves-excess reserves

Assignment Help Financial Management

Reference no: EM131923676

Consider the following simplified balance sheet of a commercial bank:

ASSETS LIABILITIES

Vault cash $200 $3500 Deposits

Deposits at the

Federal Reserve $300

Loans $3000

The required reserve ratio is 10 percent.

1. Find Actual Reserves $ , Required Reserves $ , and Excess Reserves $ .

2. By how much can this bank increase its loans? $

3. What is the money (deposit) multiplier equal to?

4. By how much can the entire banking system expand their loans? $

5. How much new wealth is directly created from this expansion of deposits? $

Explain how each of the following policy actions by the Fed would affect AR, RR, ER, bank lending, and the growth of the money supply:

1. a decrease in the required reserve ratio

AR remain the same ER money multiplier

RR bank lending money supply

2. an increase in the discount rate

AR ER money multiplier

RR bank lending bank lending money supply

3. a Fed's purchase of US government securities from the public

AR remain the same ER remain the same money multiplier increases

RR remain the same bank lending increases money supply increases

Consider the following simplified balance sheet of a commercial bank: ASSETS LIABILITIES Vault cash $200 $3500 Deposits Deposits at the Federal Reserve $300 Loans $3000 The required reserve ratio is 10 percent. 1. Find Actual Reserves $ , Required Reserves $ , and Excess Reserves $ . 2. By how much can this bank increase its loans? $ 3. What is the money (deposit) multiplier equal to? 4. By how much can the entire banking system expand their loans? $ 5. How much new wealth is directly created from this expansion of deposits? $ Explain how each of the following policy actions by the Fed would affect AR, RR, ER, bank lending, and the growth of the money supply: 1. a decrease in the required reserve ratio AR remain the same ER money multiplier RR bank lending money supply 2. an increase in the discount rate AR ER money multiplier RR bank lending bank lending money supply 3. a Fed's purchase of US government securities from the public AR remain the same ER remain the same money multiplier increases RR remain the same bank lending increases money supply increases

Reference no: EM131923676

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