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).
(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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Definitions:

REM Sleep

is a phase of sleep characterized by rapid eye movement, low muscle tone, and vivid dreaming, considered crucial for memory consolidation and emotional regulation.

Paradoxical Sleep

Another term for REM (Rapid Eye Movement) sleep, characterized by active brain waves, rapid eye movements, and dreaming, despite the body being in a state of muscle paralysis.

REM Rebound

An increased frequency of rapid-eye-movement (REM) sleep experienced after a period of REM sleep deprivation.

Repression

A defense mechanism where unpleasant thoughts or desires are unconsciously excluded from the conscious mind.