How would deposits change if reserves increased


Assume that the consolidated balance sheet for the commercial banking system can be simplified as follows D(Deposits)+NW(Net worth) = R(Revenue)+L(Loans). Assume that the bank maintains a fixed reserve ratio (R/D) of 10% and a fixed capital adequacy ratio (NW/L) of 10%. In addition, assume that the cash holdings of the non-bank public are a fixed proportion of deposits of 5% and that Reserves total $10bn. How large is the monetary base ($bn)? How large is the money supply? What is the money multiplier? How would deposits change if reserves increased by $2bn by helicopter drop? How much would net worth change? Do overall assets change by the same amount as liabilities?

Request for Solution File

Ask an Expert for Answer!!
Microeconomics: How would deposits change if reserves increased
Reference No:- TGS058316

Expected delivery within 24 Hours