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TABLE D: ASSETS LIABILITIES Reserves $840,000 Deposits $12 million Loans $11.160 million Total $12 million Total...

TABLE D:

ASSETS

LIABILITIES

Reserves

$840,000

Deposits

$12 million

Loans

$11.160 million

Total

$12 million

Total

$12 million

Please complete Table D.

50. Table D Bank could make additional loans of $120,000, if the required reserve ratio were

A) 4%.

B) 8%.

C) 5%.

D) 6%.

51. (EXTRA POINT)  The money multiplier for this bank, when it has zero excess reserves is:

A. 20

B) 16.67

C) 14.29

D) 12.5

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Answer #1

Answer 50. Bank could make additional loans of $120,000, if the required reserve ratio were

- D. 6%

Explanation-

If bank wants to make additional loan of $120, 000 then bank have to reduced their required reserve by $120, 000. The new required reserve will be :

= $ 8,40,000 - $120, 000 =$ 720,000

reserve ratio = required reserve × 100/ deposits

Required reserve ratio = $ 720,000 × 100/ $12 million

=6 %

Answer 51.The money multiplier for this bank, when it has zero excess reserves is:

- B. 16.67

Explanation-

Money multiplier = 1/ required reserve ratio

= 1/6% or 1/0.06

= 16.67

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