1. You deposit $100 of currency into your account. Explain what happens to reserves , checkable
deposits, and monetary base?
2. Explain what the shadow banking system is and how it works.
3. Your bank has the following balance sheet:
Assets Liabilities
Reserves $70 million Checkable deposits $200 million
Securities $50 million
Loans $130 million Bank capital $50 million
If the
unexpected deposit outflow of $50 million? Explain your answer.
4. Explain and demonstrate graphically that if the central bank pursues targeting a monetary
aggregate, it is likely to lose control over the interest rate.
5. In the market for reserves, the federal funds rate is equal to the interest rate paid on
reserves
funds rate.
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