Elucidate the factors influencing excess reserve ratio.
Analyze the factors that influence the banks desired excess reserve ratio, re. What would happen to the magnitude of re if:
a) The Fed surprises financial markets by sharply boosting the discount rate?
b) The FDIC reduces the deposit insurance ceiling from $100,000 to $1,000?
c) Short-term interest rates rise sharply?
d) The economy slumps into a Japanese-style deflationary spiral