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
What are the main aspects of globalisation Two of the other main aspects of globalisation are greater international mobility of capital and to some extent of labour. Globalisa


What is gross domestic product Economic growth is most commonly calculated in terms of the annual percentage rate of change in real gross domestic product (GDP).

Q. What do you mean by Price index? Because we are only interested in percentage change of the price level and not particular value, we can divide every price level by a given

Consider the following demand schedule. Does it apply to a perfectly competitive firm? Compute marginal and average revenue Price Quantity Price Quantity $95 2 $55 5 $88 3 $40 6 $

How price level rises differ from price rises In macroeconomics, it's common to use term "prices" or "price" as short for price level. Expression "prices rise" must be interpre

Suppose the inverse demand curve for a market is equal to p = 100 -- 0.3Q. The inverse market supply curve is p = 20 + 0.5Q. 1. Calculate the equilibrium price and quantity;

/* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-prior

All other things being held constant, what is the change in the dependent variable for a unit change in the first independent variable for the multiple regression equation: ? = 5.2

What do is and LM curve signify?