OLowes Workspace Low httpeztomheducationcomhmtpx Question 2

OLowe\'s Workspace Low http:/ezto.mheducation.com/hm.tpx Question 2 value 3.33 points Assume that the following data describe the condition of the banking system equired Reserve Ra 20 Percent (a) Total deposits (b) Total reserves $100 billion 30 20 billion 10 Required reserves multi (f) Unused lendingcapa what would the following values be immediately after a change in the required reserve ratio from 0.20 to 0.10? Instructions: Enter your response rounded to three decimal places. (a) Total deposits: $50 billiorn billion (b) Total reserves billion (c) Required reserves: billion (d) Excess reserves billion (e) Money multiplier unused lending capacity billion eBook & Resources

Solution

The formulae required for completing the given numerical are as follows:

After the reserve ratio changes from 0.20 to 0.10 (10%), the new values are:

a) Total Deposits = $100 Billion (Doesn’t depend on reserve ratio)

b) Total Reserves = $30 Billion (Doesn’t depend on reserve ratio)

c) Required Reserves = 0.10 * 100 = $10 Billion

d) Excess Reserves = $30 Billion - $10 Billion = $20 Billion

e) Money Multiplier = 1/0.1 = 10.

f) Unused lending Capacity = 10* $20 Billion = $200 Billion.