By using the table, Commercial Bank Balance Sheet Assets (S) Liabilities (S) Vault Cash 8000 Deposits 35000 Loans 27000 1. If the required reserve ratio is 15 percent, the required reserve is $_ 2. If the required reserve ratio is 15 percent, the maximum loan that the bank can newly make is $ 3. Update the balance sheet after the bank makes a new loan up to the amount determined in #2. 4. With the updated balance sheet (#3), calculate total assets ($) and total liabilities (S).

By using the table, Commercial Bank Balance Sheet Assets (S) Liabilities (S) Vault Cash 8000 Deposits 35000 Loans 27000 1. If the required reserve ratio is 15 percent, the required reserve is $_ 2. If the required reserve ratio is 15 percent, the maximum loan that the bank can newly make is $ 3. Update the balance sheet after the bank makes a new loan up to the amount determined in #2. 4. With the updated balance sheet (#3), calculate total assets ($) and total liabilities (S).

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter27: Money And Banking

Section: Chapter Questions

Problem 18RQ: What is the risk if a bank does not diversify its loans?

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Round Deposits Required Reserves of 20% Excess Reserves New Loans 50% of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 $100.00 $400.00 $400.00 $200.00 $200.00 2 $200 $40 $160 $160 $80 $80 3 $80 $16 $64 $64 $32 $32 4 $32 $6.40 $25.60 $25.60 $12.80 $12.80 5 $12.80 $2.56 $10.24 $10.24 $5.12 $5.12 6 $5.12 $1.02 $4.10 $4.10 $2.05 $2.05 7 $2.05 $.41 $1.64 $1.64 $.82 $.82 8 $.82 $.16 $.66 $.66 $.33 $.33 9 $.33 $.07 $.26 $.26 $.13 $.13 10 $.13 $.03 $.10 $.10 $.05 $.05 Totals $833.25 $166.65 $666.60 $666.60 $333.30 $333.30 Calculate the new money supply. Calculate the money multiplier.
Round Deposits Required Reserves of 20% Excess Reserves New Loans None of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 $100 $400 $400 0 $400 2 $400 $80 $320 $320 0 $320 3 $320 $64 $256 $256 0 $256 4 $256 $51.20 $204.80 $204.80 0 $204.80 5 $204.80 $40.96 $163.84 $163.84 0 $163.84 6 $163.84 $32.77 $131.07 $131.07 0 $131.07 7 $131.07 $26.21 $104.86 $104.86 0 $104.86 8 $104.86 $20.97 $83.89 $83.89 0 $83.89 9 $83.89 $16.78 $67.11 $67.11 0 $67.11 10 $67.11 $13.42 $53.69 $53.69 0 $53.69 Totals $2231.57 $417.31 $1785.26 $1785.26 0 $1785.26 Calculate the new money supply. (Enter response here.) Calculate the money multiplier.
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