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Macroeconomic: Money, Banking and Monetary Policy

Question # 00075430
Subject: Economics
Due on: 06/12/2015
Posted On: 06/12/2015 03:24 AM

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Assets                                Liabilities & Net Worth

Vault Cash $ 10,000               Checkable deposits $ 500,000

Deposit at the Fed 190,000       Stock shares 200,000

Loans 340,000

Property 60,000

Gov’t Securities 100,000


 Use the balance sheet above to answer the following questions. Assume the required reserve ratio is 10%.

a. This commercial bank has total reserves of: ___________________________

b. This commercial bank has required reserves of: ___________________________

c. This bank can safely expand its loans by a maximum of: ___________________________

d. The monetary multiplier is: ___________________________

Using the bank balance sheet above, assume that the bank makes a loan of $20,000 from vault cash.

e. The bank's reserves now total: ___________________________

f. What is the value of all the assets after the loan? ___________________________

Using the original bank balance sheet above, assume that the bank makes a loan of $30,000.

g. The bank will then have excess reserves of: ___________________________

Again, use the original balance sheet above.

h. If the original bank balance sheet was for the commercial banking

system, rather than a single bank, the maximum amount by which this

banking system can expand the supply of money by lending is: ___________________________
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