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explain and draw the use of easy monetary policy on the AD-AS model explain what occurs...

explain and draw the use of easy monetary policy on the AD-AS model
explain what occurs when The Fed "buys bonds"
1. You are given this account for a bank
Assets Liabilities
Reserves $450 Deposits $3000
Loans $2550

The required reserve ratio is 10%
a. How much is the bank required to hold as reserves given its deposits of $3000?
b. How much are its excess reserves?
c. By how much can the bank increase its loans?
d. Suppose a depositor comes to the bank and withdraws $200 in cash. Show the bank’s
new balance sheet, assuming the bank obtains the cash by drawing down its reserves.
Assets Liabilities
Reserves ____ Deposits ____
Loans $2550

e. From part d) is the bank meeting the reserve requirement, can lend reserves, or must it
borrow reserves?


6. How will the following actions affect the money supply?
(a) a reduction in the discount rate
(b) an increase in the reserve requirements
(c) the purchase by the Fed of $100 million of U.S. securities from a commercial bank
(d) the sale by the Fed of $200 million of U.S. securities to a private investor

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