Controlling the supply of money, Macroeconomics

When the reserve requirement changes, which of the following will change in the total banking system?  (Answer change or No Change)

Transaction Deposits

Total Reserves

Required Reserves

Excess Reserves

Lending Capacity

Suppose that a lottery winner deposits $20 million in cash into her transactions account at the Bank of America (B of A). Assume a reserve requirement of 25 percent and no excess reserves in the banking system prior to this deposit.

(a) Use step 1 in the T accounts below to show how her deposit affects the balance sheet of B of A.

(b) Has the money supply been changed by her deposit?

(c) Use step 2 below to show the changes at B of A after the bank fully uses its new lending capacity?

(d) Has the money supply changed in step2?

(e) In step 3 the new borrower(s) writes a check for the amount of the loan in step 2. That check is deposited at another bank and B of A pays the other bank when the check clears. What does the B of A balance sheet look like now?

(f) After the entire banking system uses the lending capacity of the initial ($20 million) deposit, by how much will the following have changed?

Posted Date: 3/16/2013 6:18:32 AM | Location : United States







Related Discussions:- Controlling the supply of money, Assignment Help, Ask Question on Controlling the supply of money, Get Answer, Expert's Help, Controlling the supply of money Discussions

Write discussion on Controlling the supply of money
Your posts are moderated
Related Questions
Consider the above table. Assuming the government imposes a price floor on garbanzo beans of $8, what would be the likely result? a. no change, equilibrium would prevail b. T

Determine the current productivity results for the non-farming business sector and the manufacturing sector. Discuss recent productivity and cost trends and make predictions for th

Macroeconomics: Question 1 and 2 relate to content and skills covered --- OPEN-MARKET MACROECONOMICS: BASIC CONCEPTS , International Trade and Exchange Rates Question 3 relates to

Suppose A can somehow change the game in problem 5.1 to a new one in which his payoff from Up is reduced by 2, producing the following payoff matrix. a. Find the Nash equilibriu


Use the following data for a firm's output at various levels of employment (L) to calculate: a) its marginal physical product of labor (MPPL) schedule; (b) its (MPPL/MRCL) schedule

An investor has a series of three $15,000 payments expected to be realized at the end of years three, four, and five. Calculate the present value P at time zero and the correspondi

state and explain two factors that cause the shifts in the balance of payments curve.

HOW MARRIAGE AFFECTS GDP

Define the term - Productivity Productivity is the concept which measures how outputs can be maximised from given inputs. In factories labour productivity is normally calculate