Read the following scenario and write a 1 page summary based on the prompts that follow.
Suppose that the T-account for First National Bank is as follows:
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Assets
|
Liabilities
|
|
Reserves
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$100,000
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Deposits
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$500,000
|
|
Loans
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$400,000
|
|
|
For this assignment, you must assume that all other banks hold only the required amount of reserves.
• If First National decides to loan out its excess reserves, by how much would the economy's money supply increase?
• Provide an overview of the scenario.
• Identify key Issues or problems that may exist.
• Provide your conclusion of this scenario.