5. Working through a change in the reserve requirement Assume that the following table portrays the balance sheet of Fir

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5 Working Through A Change In The Reserve Requirement Assume That The Following Table Portrays The Balance Sheet Of Fir 1 (31.37 KiB) Viewed 17 times

5. Working through a change in the reserve requirement Assume that the following table portrays the balance sheet of First Eastern bank. Assets Liabilities and Net Worth Vault Cash $150,000 Deposits $900,000 Deposits at Fed $250,000 Loans $500,000 Total $900,000 Total $900,000 First Eastern's bank reserves are equal to $ checking deposits, First Eastern' would maintain reserves over and above the desired amount. If First Eastern bank wanted to maintain 0.20 of its assets as reserves against as reserves. Therefore, it would have $ as additional If First Eastern uses the reserves above the desired level to extend additional loans, the money supply would increase by as If First Eastern wanted to maintain 0.10 of its assets as reserves against checking deposits, First Eastern' would maintain reserves, additional reserves would be $ and the increase in the money supply would be $ The increase in the money supply will be if First Eastern chooses a desired reserve ratio of 0.10.