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Unformatted text preview: Deposit + 100 Bank A +100 Other Banks -100 Other Banks Reserve – 100 Deposit – 100 No impact on money supply C. a) Bank A Loan + 100 Deposit + 100 Required = -12 (deficit) Loan does not add to Reserve b) Bank A BOC Reserve 12 Discount loan 12 Discount loan +12 Reserve + 12 Money Expansion c) Repayment in (a ) Bank A BOC Reserves +100 Reserve +100 Loans -100 Money Expansion Repayment in (b) Bank A BOC Reserve -12 Discount Loan -12 Discount Loan -12 Reserv-12 Money Contraction d. a) Impacts of decreasing the reserve ratio : Banking system Required Reserve = 10 Excess Reserve = 2 Reserve + 12 Deposit + 100 Money Expansion b) Banking system Impacts of increasing the reserve ratio: Required Reserve = 14 Reserve + 12 Deposit + 100 Deficit Reserve = 2 Money Contraction E. BOC Bank A Reserve + 100 Reserve + 100 Deposit + 100 Government Deposit -100 Required. Reserve. = 12 Excess Reserve = 88 Money Expansion...
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- Spring '12
- Monetary Policy, Federal Reserve System, Fractional-reserve banking, BoC