Initial deposit ($100) $ The Money Multiplier Process Loan Loan University Bank $ Excess reserves: $25 Required reserves: $75 Deposit Bank #2 Deposit Excess reserves: $6.25 Required reserves: $18.75 Instructions: Round your responses to two decimal places. a. What volume of loans can the banking system in the figure support? Bank #3 Loan Deposit Excess reserves: $1.56 Required reserves: $4.69 Bank #4 etc. Excess reserves: $0.39 Required reserves: $1.17 b. If the reserve requirement were 15 percent rather than 75 percent, what would the system's lending capacity be?

Initial deposit ($100) $ The Money Multiplier Process Loan Loan University Bank $ Excess reserves: $25 Required reserves: $75 Deposit Bank #2 Deposit Excess reserves: $6.25 Required reserves: $18.75 Instructions: Round your responses to two decimal places. a. What volume of loans can the banking system in the figure support? Bank #3 Loan Deposit Excess reserves: $1.56 Required reserves: $4.69 Bank #4 etc. Excess reserves: $0.39 Required reserves: $1.17 b. If the reserve requirement were 15 percent rather than 75 percent, what would the system's lending capacity be?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.3P

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Initial deposit ($100) $ The Money Multiplier Process Loan Loan University Bank $ Excess reserves: $25 Required reserves: $75 Deposit Bank #2 Deposit Excess reserves: $6.25 Required reserves: $18.75 Instructions: Round your responses to two decimal places. a. What volume of loans can the banking system in the figure support? Bank #3 Loan Deposit Excess reserves: $1.56 Required reserves: $4.69 Bank #4 b. If the reserve requirement were 70 percent rather than 75 percent, what would the system's lending capacity be? etc. Excess reserves: $0.39 Required reserves: $1.17
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