Reference no: EM132791784
Suppose Bank A, which faces a reserve re quirement of 10 percent, receives a $1,000 checking deposit from a customer
a. Assuming that it wishes to hold no excess reserves , deter mine how much the bank should lend. Show these changes on Bank A's balance sheet.
b. Assuming that the loan shown in Bank A's balance sheer is redeposited in Bank B , show the changes in Bank B's balance sheet if it lends out the maximum possible .
c. Repeat this process for three additional banks : C, D, and E.
d. Using the simple money multiplier , calculate the total change in the money supply resulting from the $1,000 initial deposit .
e . Assume Banks A, B, C,D, and E each wish to hold 5 percent excess reserves.
Problem 1: How would holding this level of excess serves affect the total change in the money supply ?
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