Reference no: EM133129385
A bank has $50,000 of deposits, $42,000 of loans and $8,000 of reserves. The required reserve ratio is 10%, the desired excess reserve ratio is 7%, and the currency ratio is 15%. Use this to answer questions #1 through #4.
1. What is the level of undesired excess reserves?
2. What is the level of currency in circulation?
3. What is the money multiplier? [Round off to 2 decimal places.]
4. By how much will the money supply have to change to reach equilibrium?
5. If a bank has undesired excess reserves of -$500, and if rr=14%, e=5.5% and c=20%, then to restore equilibrium by how much will the money supply (M1) change?
6. If a bank has undesired excess reserves of $450 and where e=12%, c=40%, and m*=5.1, to restore equilibrium by how much will the money supply (M1) change?
7. If a bank has $21,500 in deposits, and $4,500 in reserves, and if rr=15%, e=5% and c=65%, how much undesired excess reserves does the bank have?
8. If a bank has $30,000 in deposits, and $3,250 in reserves, and if rr=20%, e=15% and c=25%, how much currency is in circulation?
9. If a bank has undesired excess reserves of $725 and where e=11%, c=6%, and m*=4.4, what is the value of the required reserve ratio (rr)? [Express in % terms - use that symbol - rounded to two decimal places. For example, 3.25% is good, while .0325 is not.]
10. Consider the information provided in #9 and your answer to that question. If you also know that desired excess reserves are $2,855, what must be the level of Total Reserves?
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