(Answered) Banks play role in changing monetary supplya assume the

Economics

Banks play role in changing monetary supply

a) Assume the bank received a cash deposit of $20,000 What is the immediate impact of this transaction on the money supply. and or its composition explain.

b) Suppose that the reserve requirement is 10 percent and the bank keeps additional 10 percent reserves Calculate following.

i) The maximum amount which the bank will increase its loans from the transactions in part a.

ii) The maximum increase in the money supply that will be generated from the transaction in part a)

c) In this same economy federal reserve purchases $10,000 in securities

i) What is the total change in reserve for the banking system.

ii) What is the maximum change in the money supply as a result of securities purchase

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