Suppose a banking system with the following balance sheet has no excess reserves. Assume that banks will make loans in t

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Suppose A Banking System With The Following Balance Sheet Has No Excess Reserves Assume That Banks Will Make Loans In T 1 (32.74 KiB) Viewed 37 times

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Suppose a banking system with the following balance sheet has no excess reserves. Assume that banks will make loans in the full amount of any excess reserves that they acquire and will immediately be able to eliminate loans from their portfolio to cover inadequate reserves. Assets (in Billions) Liabilities (in Billions) Total reserves $50 Transactions $400 account deposits Securities $200 Loans $150 Total assets $400 Total liabilities $400 Instructions: In part a, enter your response as a percentage rounded to one decimal place. For all other parts, enter your responses as a whole number. a. What is the reserve requirement? 12.5% b. Suppose the reserve requirement is changed to 10 percent. Reconstruct the balance sheet of the total banking system after all banks have fully utilized their lending capacity
b. Suppose the reserve requirement is changed to 10 percent. Reconstruct the balance sheet of the total banking system after all banks have fully utilized their lending capacity Assets (in Billions) Total reserves $ Liabilities (in Billions) Transactions 50 account deposits 200 $ Securities Loans Total assets Total liabilities C. By how much has the money supply changed as a result of the lower reserve requirement (part b)? billion d. Suppose the Fed now buys $20 billion of securities directly from the banks. What will the banks' books look like immediately after this purchase but before the banks make any additional loans? Assets (in Billions) Total reserves Liabilities (in Billions) Transactions account deposits Securities Loans Total assets Total liabilities
d. Suppose the Fed now buys $20 billion of securities directly from the banks. What will the banks' books look like immediately after this purchase but before the banks make any additional loans? Assets (in Billions) Total reserves Liabilities (in Billions) Transactions account deposits Securities Loans Total assets Total liabilities e. How much excess reserves do the banks have now? billion f. By how much can the money supply now increase due to this open market purchase? $ billion