{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# discussionsectionhandout11answersfall2007 - Econ 102 Fall...

This preview shows pages 1–2. Sign up to view the full content.

Econ 102: Fall 2007 Discussion Section Handout #11 Question #1. T- Accounts and the Money Multiplier All Banks are required to hold \$1 in reserves for every \$10 of deposits in this economy. Assume that all accounts were previously equal to 0 (or that we are only looking at changes), and that there are an infinite number of banks in this economy. a) At first Susan has \$3000 cash in hand. Suppose that she deposits all of these in Bank #1. Fill the following table for Bank #1 immediately after Susan has made her deposit. Be sure to label all entries. Bank #1’s Balance Sheet Assets Reserve: \$3000 Liabilities DD \$3000 b) Because Susan deposits \$3000 in cash in Bank #1, Bank #1 has i. Total Reserves = \$3000 ii. Required Reserves = \$300 iii. Excess Reserves = \$2700 c) Now suppose that Bank #1 lends out any excess reserves to Bill. Bill uses the entire loan to buy a TV from Best Buy, who deposits his payment in Bank #2. Fill in the following table for Bank #1 and #2 immediately after Best Buy has deposited his payment (Bill’s loan) in Bank #2. Be sure to label all entries.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern