What is the maximum amount the money supply can increase

Reference no: EM13769595

A bank currently has $70,000 in deposits, $6,000 in cash in the vault, $12,000 on deposit with the Fed, and $7,000 in government securities. The required reserve ratio is 20 percent. Answer these questions:

1) What is the maximum amount the money supply can increase, assuming this bank is the only bank in the system that has excess reserves?

2) An individual deposits a $750,000 check into the bank. That individual had just converted foreign currency into dollars so the $750,000 was not in the money supply before the deposit. What is the maximum size loan the bank can make once the check clears?

3) What is the maximum amount the money supply can increase as a result of the $750,000 deposit?

4) If these expansions in the money supply happen, what effect will it have on aggregate demand, GDP, and employment?

5) What could keep the expansions from happening?

Reference no: EM13769595

Questions Cloud

Pollutants harm ecosystem function : Pollutants can harm ecosystem function and may also harm human health.

International trade administration in the department : International Trade Administration in the Department of Commerce keeps an up-to-date Web site with the easiest to access U.S. trade data. Trade Stats Express page.

Ethical and social implications involved in your life work : This essay will ultimately be 5 pages long and combine the summaries, evaluations and analysis of at least two textual sources. Your purpose will be to clearly articulate the ethical and social implications involved in your life's work

The health and safety of our communities : What successes have they experienced in designing and developing each program?

What is the maximum amount the money supply can increase : What is the maximum amount the money supply can increase, assuming this bank is the only bank in the system that has excess reserves and

Explain how is an exception handled in c++ : How is an exception handled in C++. Explain by use of the syntax and an example of class oriented program.

Describe a major theme of the movie : Select a movie from AFI's 10 Top 10 lists and explain how three cinematic techniques and/or design elements have helped establish a major theme in that film. Note: While you are allowed to choose a film that does not come from the AFI lists, you are ..

Brief summary of the coca-cola companys efforts : Provide a brief summary of The Coca-Cola Company's efforts to protect its soft drink formula as a trade secret. Describe one (1) challenge the company has faced in preserving its trade secret

Identify different types and levels of statistics : Define statistics. Identify different types and levels of statistics. Describe the role of statistics in business decision-making.

User Account

All Pages