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What is the maximum amount of new loans

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Reference no: EM132790117

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

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?

-Showing your calculations and analysis in Microsoft Excel format.

Reference no: EM132790117

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