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Bank A's total reserve (R) changed by $56,800,000 when the Fed purchased bonds from bank A. Required reserve ratio for the banking system is set at 4.6%, (0.046). a. How much of the change in total reserve can bank A lend out? In other words, what is bank A's excess reserve after the Fed's purchased bonds from it? $ b. By how much will total money supply change if bank A, and all subsequent banks, are able to lend out their entire excess reserves as the result of the initial change in reserve equal to $56,800,000 in bank A? $

Bank A's total reserve (R) changed by $56,800,000 when the Fed purchased bonds from bank A. Required reserve ratio for the banking system is set at 4.6%, (0.046). a. How much of the change in total reserve can bank A lend out? In other words, what is bank A's excess reserve after the Fed's purchased bonds from it? $ b. By how much will total money supply change if bank A, and all subsequent banks, are able to lend out their entire excess reserves as the result of the initial change in reserve equal to $56,800,000 in bank A? $

Brief Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter11: The Monetary System
Section: Chapter Questions
Problem 5PA
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Bank A's total reserve (R) changed by $56,800,000 when the Fed purchased bonds from bank A. Required reserve ratio for the banking system is set at 4.6%, (0.046). a. How much of the change in total reserve can bank A lend out? In other words, what is bank A's excess reserve after the Fed's purchased bonds from it? $ b. By how much will total money supply change if bank A, and all subsequent banks, are able to lend out their entire excess reserves as the result of the initial change in reserve equal to $56,800,000 in bank A? $
Transcribed Image Text:Bank A's total reserve (R) changed by $56,800,000 when the Fed purchased bonds from bank A. Required reserve ratio for the banking system is set at 4.6%, (0.046). a. How much of the change in total reserve can bank A lend out? In other words, what is bank A's excess reserve after the Fed's purchased bonds from it? $ b. By how much will total money supply change if bank A, and all subsequent banks, are able to lend out their entire excess reserves as the result of the initial change in reserve equal to $56,800,000 in bank A? $
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