# ps_ch22_b - Problem Set For Chapter 22 - b The Money Supply...

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Problem Set For Chapter 22 - b The Money Supply and The Federal Reserve System 1) Assume that current level of money supply is \$ 200 million. Furthermore suppose there are \$ 10 million in excess reserves in the banking system and the required reserve ratio is 10 %. a) How much can the money supply expand? b) What will be the new level of money supply? 2) You are given this account for a bank: ASSETS LIABILITIES Reserves \$ 500 \$ 3500 Deposits Loans 3000 The required reserve ratio is 10 percent. a) How much is the bank required to hold as reserves, given its deposits of \$ 3500? b) How much are its excess reserves? c) By how much can the bank increase its loans? d) Suppose a depositor comes to the bank and withdraws \$ 200 in cash. Show the bank’s new balance sheet, assuming the bank obtains the cash by drawing down its reserves. Does the bank now hold excess reserves? Is it meeting the required reserve ratio? If not, what can it do? 3)

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## This note was uploaded on 12/03/2009 for the course INDUSTRIAL IE 307 taught by Professor Arzuakyüz during the Spring '09 term at Atılım Üniversitesi.

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ps_ch22_b - Problem Set For Chapter 22 - b The Money Supply...

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