Bank Reserves Assignment

Bank Reserves Assignment

Suppose that the reserve ratio is .25, and that a bank has actual reserves of $15,000, loans of $40,000, and demand deposits of $50,000. A. Excess reserves are $____________________. B. This bank, being a single bank in a multibank system, can safely lend $____________________. C. The multibank system can safely lend $__________________. D. It is possible for the monetary base to increase by a total of $___________________. Assume now that the Fed lowers the reserve ratio to .20: E. This bank, being a single bank in a multibank system, can now safely lend $_____________________. F. The multibank system can safely lend $____________________. G. It is now possible for the monetary base to increase by a total of $________________________. H. The increase/decrease in the potential money supply because of the decrease in the required reserve ratio is $_____________________.

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