What happens to total loans and security holdings of banks

Reference no: EM13231690

assume (1) a required reserve ratio of 10% (.10), (2) banks don't hold excess reserves, and (3) the public doesn't change its holdings of currency, answer the following. For part e, assume only 1 and 2. For part f, assume only 1 and 3.

a. Suppose the Fed makes a $1m open market purchase. What happens to total deposits and the money supply? What happens to total loans + security holdings of banks?

b. Suppose the Fed makes a $2m open market sale. What happens to total deposits and the money supply? What happens to total loans + security holdings of banks?

c. If banks collectively borrow $3m from the Federal Reserve, what happens to total deposits and the money supply?

d. If the Federal Reserve increases the reserve requirement ratio to 20%, what happens to the change in total deposits and the money supply in part 1 of this question?

e. While on the run from President Logan's thugs, Jack Bauer uses his bank's ATM to withdraw $1000 from his checking account. What happens to total deposits and the money supply?

f. Suppose that banks become concerned that borrowers won't repay loans and that issuers of securities may default on bonds they've issued. What will happen to total deposit and the money supply.

Reference no: EM13231690

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