Illustrate what is the fed funds rate in the banking system

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Reference no: EM1344012

Q. (a.) 3rd National Bank is fully loaned up with reserves of $30,000 also demand deposits equal to $100,000. The reserve ratio is 10%. Households deposit $10,000 in currency into the bank. How much excess reserves does the bank now have also illustrate what is the maximum amount of new funds which can be created in the banking system as a result of this deposit? Demonstrate all work.

(b.) Illustrate what is the fed funds rate in the banking system? Explicates howthe Fed manipulates this rate in order to achieve macroeconomic objectives.

Reference no: EM1344012

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