Springfield National Bank has the following balance sheet. Assets Liabilities and Equity Reserves $30,000 Demand deposits $100,000 Loans $70,000 Property $2,000 Equity (net worth) $2,000 Assume that the reserve requirement ratio is 20 percent. A. Calculate the dollar value of the reserves that Springfield National is required to hold. B. Given the current reserves, calculate the maximum value of additional loans that Springfield National can make. C. Assume that Flanders raises $5,000 in cash from a yard sale and deposits the cash in his checking account at Springfield National. By how much does the money supply immediately change as a result of Flanders' deposit?

Springfield National Bank has the following balance sheet. Assets Liabilities and Equity Reserves $30,000 Demand deposits $100,000 Loans $70,000 Property $2,000 Equity (net worth) $2,000 Assume that the reserve requirement ratio is 20 percent. A. Calculate the dollar value of the reserves that Springfield National is required to hold. B. Given the current reserves, calculate the maximum value of additional loans that Springfield National can make. C. Assume that Flanders raises $5,000 in cash from a yard sale and deposits the cash in his checking account at Springfield National. By how much does the money supply immediately change as a result of Flanders' deposit?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 3.4P

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