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Suppose the Required Reserve Ratio Is 20 Percent

question 126

Essay

Suppose the required reserve ratio is 20 percent. The balance sheet for Bank AAA is given below (figures are in billions). Suppose the required reserve ratio is 20 percent. The balance sheet for Bank AAA is given below (figures are in billions).    (A)How many new loans can Bank AAA make? (B)If it is not possible to change the amount of bonds, what would have to happen to the reserves, loans, and deposits for this bank? (C)If it is possible to change the amount of bonds, how would this change your answer to part (B)? (D)If it is not possible to change the amount of bonds, what would have to happen to the deposits in the entire banking system?
(A)How many new loans can Bank AAA make?
(B)If it is not possible to change the amount of bonds, what would have to happen to the reserves, loans, and deposits for this bank?
(C)If it is possible to change the amount of bonds, how would this change your answer to part (B)?
(D)If it is not possible to change the amount of bonds, what would have to happen to the deposits in the entire banking system?


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