Chapter 25 Money the federal reserve and the
interest rate
Exercce 2.5
Assets
Liabilities
Reserves 700 $
Deposits 7,500 $
Loans 6,800 $
Excess reserves=actual reserves-required reserves
Chap 5 –
Exercice 2.1- Cash: Asset—Bank has it on hand.
Demand Deposits: Liability—Claims by depositors can be
withdrawn at any time.
Savings deposits: Liability—same logic.
Required Reserves: Assets—They are in the vault as cash
or on deposit with the central bank.
Loans: Assets—They represent claims of the bank on
borrowers.
Deposits at the Fed: Assets—They can be withdrawn at
any time; they are owned by the bank.
Deposit =Monetary base= 10,000 usd
Required reserve ratio= 20%
Required reserve = 2000 usd
Loans = 8,000 usd
Money multiplier = 1/0.2 = 5
Money supply = 50,000 usd
Required reserve was 17%
The new required reserve 16 % which lead to an increase
in the money supply 1,300
Initial Monetary base = deposits = X
