What is the reserve requirement

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Reference no: EM133336528

Question: Excess Reserves Loans 250 Total $2,000 Bonds 1,450 100 Total $2,000

a) What is the reserve requirement?

b) How much can this bank loan out?

c) How much can the entire banking system expand the money supply by making loans?

d) If the Fed bought the $100 in bonds from Davidson's Bank, what would be the immediate effect on the money supply? How much of this purchase could Davidson's bank loan out?

e) How much could the money supply ultimately increase through the entire banking system from this $100 bond purchase?

f) Suppose that Bill Gates, one of Davidson's customers, deposits $50 into his checking account. What effect would this withdrawal have on the following? 1) The money supply 2) Required Reserves 3) Excess Reserves

g) How much of Bill Gates' $50 deposit may this bank lend out.

h) How much can the entire banking system expand the money supply from this $50 deposit?

i) How much will deposits expand throughout the banking system from this $50 deposit?

j) If a bank finds that it does not have enough required reserves to meet Fed requirements, what can it do to acquire the necessary cash reserves?

Reference no: EM133336528

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