Assume that in a country the total holdings of banks were as follows: Bank Amount in...

Assume that in a country the total holdings of banks were as follows:

Bank	Amount in million dollars
Required Reserve	$45
Excess Reserve	$15
Deposits	$750
Loans	$600
Treasury Bonds	$90

Show that the balance sheet balances if these are the only assets and liabilities.

Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 2%, banks still want to hold the same percentage of excess reserves, and banks do not change their holdings of Treasury bonds?

How much does the money supply change by?

Expert Solution

Rahul Sunny answered 3 months ago

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