ECON 1103 In-class Assignment #15
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Mount Royal University *
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1103
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Economics
Date
Jan 9, 2024
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ECON 1103 In-class #14
Q1
Assume there exists a banking system in Calgary with three commercial banks (Bowness Bank,
Bank of Downtown, Falcon Ridge Bank). If the Bank of Alberta which is the central bank for
the province requires 10% reserve, and the banks have no deposits; however, if someone
deposited $1,600 at the Bank of Bowness, calculate how much money can be created through
the fracLonal reserve scheme.
Bowness Bank
Asset
Liabili8es
Required Reserve:
160
Deposit:
1600
Excess Reserve (loan):
1,440
Jay took out a loan from Bowness Bank and make a deposit at Bank of DT
Bank of DT
Asset
Liabili8es
Required Reserve:
144
Deposit:
1,440
Excess Reserve (loan)
1,296
Maria took out a loan from DT Bank and made a deposit at Falcon Ridge Bank
Falcon Ridge Bank
Asset
Liabili8es
Required Reserve:
129.6
Deposit:
1,296
Excess Reserve (loan)
1,166.4
1.
What is the value of the money mulLplier?
10
2.
If the Central bank of Alberta wants to expand the money supply, should they increase
or decrease the required reserve?
increase
3.
How much money can be created at the end of this process?
14,400
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