10H5 - Econ 102 Homework 5 Due(no late answer 1 Show your...

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Econ. 102. Homework 5. Due: March 22, 2010. (no late answer) *******. 1. Show your derivation and calculation explicitly. 2. Use the ruler to draw graphs. (Also show the scale explicitly). 3. E-mail submission of your answer will not be accepted. 4. Do not copy someone else’s answer. *******. I. It is well-known that the bank creates money by making loan. Please show your answer also by using T account . [10] The required reserve ratio is 0.1, and banks have no excess reserves and Erin deposits $100 in her bank. Calculate (a) The bank’s excess reserves as soon as Erin makes the deposit. (b) The maximum amount of loans that the banking system can make. (c) The maximum amount of new money that the banking system can create. Suppose that the central bank raises the required reserve ratio to 0.2 (d) Please answer (a), (b) and (c) again. (e) Do you think why the central bank decides to lower the required reserve ratio? What kind of macroeconomic problem this economy may face? [please think about recent Bank of China’s policy].
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10H5 - Econ 102 Homework 5 Due(no late answer 1 Show your...

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