Question

ed b. The money supply increases, decreases, remains constant): when the required reserve ratio increases. when the discount rate decreases. when the Fed sells securities. when the currency drain ratio increases. when the excess reserve ratio decreases. c. d. e. The table below shows the balance sheet in millions of dollars) for three banks. a. Suppose the required reserve ratio is 5 percent. Fill in the table. Bank of East Los Angeles Assets Liabilities Deposit: RR: $120 ER: Bank of Alhambra Assets Liabilities RR: Deposit: Bank of Pasadena Assets Liabilities RR: Deposit: ER: ER: 6. How much money will be created? c. Now suppose the currency drain ratio is 10%. What is the multiplier? d. How much money would be created? e. Now suppose the excess reserve ratio is 10%. How much money would be created?

Answer 1

Answer 1:

a. The money supply decreases when required reserve ratio increases.

b. The money supply increases when discount rate decreases.

c. The money supply decreases when Fed sells securities.

d. The money supply decreases when currency drain ratio increases.

e. The money supply increases when excess reserve ratio decreases.