Maximum amount of new loans

Assignment Help Finance Basics

Reference no: EM13789192

Assume that the Bank of Ecoville has the following balance sheet and the Fed has a 10% reserve requirement in place:

Balance Sheet for Ecoville International Bank
ASSETS		LIABILITIES
Cash	$33,000	Demand Deposits	$99,000
Loans	66,000

Required:

Now assume that the Fed lowers the reserve requirement to 8%.

What is the maximum amount of new loans that this bank can make?
Assume that the bank makes these loans. What will the new balance sheet look like?
By how much has the money supply increased or decreased?
If the money multiplier is 5, how much money will ultimately be created by this event?
If the Fed wanted to implement a contractionary monetary policy using reserve requirement, how would that work?

Reference no: EM13789192

Questions Cloud

Costs of capital for different operating divisions : Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC).

This assignment is to research and analyze a topic of intere : This assignment is to research and analyze a topic of interest in the field of conflict resolution. Suggested topics for this assignment are to research: •The latest "best practices" in conflict resolution •Various communication styles •Power and eth..

Disaster to the biodiversity in the ecosystem : Give a brief overview of the impacted ecosystem including a description of the wildlife and human populations.

Machines internal rate of return is closest : Tidwell Corporation is considering the purchase of a machine costing $18,000. Tidwell estimates that this machine will save $5,000 per year in cash operating expenses for the next five years. If the machine has no salvage value at the end of five yea..

Maximum amount of new loans : What is the maximum amount of new loans that this bank can make? Assume that the bank makes these loans. What will the new balance sheet look like?

Project profitability index of an investment project : If the project profitability index of an investment project is zero, then:

Explain how the selected disorder is diagnosed : Explain how the selected disorder is diagnosed

Journal entry to record the accrual of these wages : During October, Dorinirl Corporation incurred $65,500 of direct labor costs and $5,100 of indirect labor costs. The journal entry to record the accrual of these wages would include a:

Formal license for logistics and supply chain management : It is important to understand what the certification and the sponsoring organization requires, and to understand how they fit in your career plan.

User Account

All Pages