(a) What is the amount of excess reserves in this commercial banking system? …………………………….………………………………………………………… ………………………………………………………………………………………. ……………………………………..………………………………………………… …………………………….………………………………………………………… ……………………………………………………………………………………… (b)What is the maximum amount that the money supply can be expanded?What would be the effect of a fall in reserve ratio to 5%, on the maximum amount that the money supply can be expanded? …………………………….………………………………………………………… ………………………………………………………………………………………. ……………………………………..………………………………………………… …………………………….………………………………………………………… ……………………………………………………………………………………… …………………………….………………………………………………………… ………………………………………………………………………………………. ……………………………………..………………………………………………… …………………………….………………………………………………………… ……………………………………………………………………………………… …………………………….………………………………………………………… ………………………………………………………………………………………. ……………………………………..………………………………………………… …………………………….………………………………………………………… ……………………………………………………………………………………… (c) Determine the stock of broad money supply assuming the non-bank public holds notes and coins of GHS4,000million.
Assuming an economy have only two commercial banks in it banking system,
Classic Bank and Prudent Bank. The following shows the balance sheet of the two
banks as at 2019.
Classic Bank
Balance sheet as at December, 2019
GHSm GHSm
Assets: Liabilities & Equity:
Reserves 1,000 Deposits 3,000
Securities 2,000 Equity 7,000
Loans & Advances 1,000
Property, Plant and Equipment 6,000 .
10,000 10,000
Prudent Bank
Balance sheet as at December, 2019
GHSm GHSm
Assets: Liabilities & Equity:
Reserves 600 Deposits 2,500
Securities 1,500 Equity 4,400
Loans & Advances 800
Property, Plant and Equipment 4,000 .
6,900 6,900
Assume a
(a) What is the amount of
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(b)What is the maximum amount that the money supply can be expanded?What would be the effect of a fall in reserve ratio to 5%, on the maximum amount that the money supply can be expanded?
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(c) Determine the stock of broad money supply assuming the non-bank public holds notes and coins of GHS4,000million.
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(d)Suppose Classic bank makes additional loans of GHS300 million to its
customers and some of these customers use GHS150 million to make
payment to other depositors of the same bank and GHS150 million to make payments to clients of Prudent bank.
(i) Draw up the new balance sheets of each bank
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