Review Exam 2 - Review Session Practice 3(4 pts Assume the...

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Review Session Practice 3. (4 pts) Assume the FED’s transaction to contract the money supply is $10M and to maximize profts the banks keep reserves down to the legal minimum. Given a very large number o± standard banks whose initial position is shown below. FILL IN THE BLANKS : BANK 1 Assets Liabilities R $20M DD $200M GS 80M L 100M Assets Liabilities R$ M DD $ M GS M L M Assets Liabilities R$ M DD $ M GS M L M BANK 2 Assets Liabilities R $20M DD $200M GS 80M L 100M Assets Liabilities R$ M DD $ M GS M L M Assets Liabilities R$ M DD $ M GS M L M where R is reserves, GS is government securities, L are loans, DD is demand deposits and the required reserve ratio is 10% 7 (4 pts) Assume the FED’s transaction to expand the money supply is $10M and to maximize profts the banks keep reserves down to the legal minimum and the required reserve ratio is 10%. Given all action takes place in a single bank whose initial position is shown below. FILL IN THE BLANKS : BANK 1 Assets Liabilities
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This note was uploaded on 12/05/2011 for the course M 341 taught by Professor Hietmann during the Spring '08 term at University of Texas.

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Review Exam 2 - Review Session Practice 3(4 pts Assume the...

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