Homework Answers
Due to presence of HOMEWORKLIB POLICY, I am answering first four parts.
i.
Reserve ratio = 100% = 1 (Deposits = Reserves)
Multiplier = 1 / reserve ratio = 1
Initially money supply is:
500000 / 1 = 500000
ii.
Amount of loans this banking system is making = Deposits - new reserves = 500000 - 100000 = 400000
iii.
Money supply = Reserves / reserve ratio = 100000 / 0.10 = 1000000
iv. Yes.
Total reserves = 100000
Required reserves = Deposits x reserve ratio = 500000 x 0.10 = 50000
Excess reserves = total reserves - required reserves = 100000 - 50000 = 50000
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