Banking and Money.docx - Surname 1 Banking and Money...

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Surname 1 Banking and Money Institution Date 1. a. If you take $100 out of your piggy bank and deposit it in your checking account, how did M1 change? Did M2 change?
b. Now assume that the bank is subject to a minimum required reserve ratio of 20%, and the bank is going to use all the excess reserves to issue new loans, how much is the total change in money supply?
2. A bank has deposits of $400. It holds reserves of $50. It has purchased government bonds worth $70. It has made loans of $300. Set up a T-account balance sheet for the bank, with assets and liabilities, and calculate the bank’s net worth $

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