Assets Liabilities
Total reserves: ________ Deposits: $500,000
Required reserves: $20,000
Excess reserves: $80,000
Loans: $ 400,000
Total Assets: $500,000 Total liabilities $500,000
a. What is the required reserve ratio? Show your calculation
- required reserve ratio= required services/ total reserves= $20,000/$100,00= .02
if the fed increases the reserve requirement from your answer to part a to 10 percent, explain verbally and show numerically what will happen to:
a- required services
b- excess reserves
c-the size of the simple money multiplier
d- the money supply in the economy