2. Required and excess reserves Suppose that Best National Bank currently has $100,000 in checkable deposits and $65,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Using these values, fill in the empty cells for reserves, required reserves, and excess reserves in the following table. Best National Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)

8. The reserve requirement, open market operations, and the money supply Consider a system of banking in which the Federal Reserve uses required reserves to control the money supply (as was the case in the United States before 2008). Assume that banks do not hold excess reserves and that households do not hold currency, so the only money exists in the form of demand deposits. To further simplify, assume the banking system has total reserves of $400. Determine the money multiplier as well as the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) 20 10 Simple Money Multiplier A higher reserve requirement is associated with a Money Supply (Dollars) money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Maintain the assumption that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to U.S. government bonds.…

8. The reserve requirement, open market operations, and the moneysupply Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $100. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement Money Supply (Percent) Simple Money Multiplier (Dollars) 15 10 A lower reserve requirement is associated with a money supply. Suppose the Federal Reserve wants to increase the money supply by $100. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to $ worth of U.S. government bonds. Now, suppose that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic conditions. Specifically,…

8. The reserve requirement, open market operations, and the moneysupply Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $300. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement Simple Money Multiplier Money Supply (Percent) (Dollars) 5           10             A higher reserve requirement is associated with a    money supply.   Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to      worth of U.S. government bonds.   Now, suppose that, rather than immediately lending out all excess reserves, banks begin…