| Chapter 10: The Money Supply & The Federal Reserve System | | | | | | 20 Points |
| Drop Box Assignment |
| 1. Referring to the Balance Sheet for the Simpson National Bank, answer the following (6 points) |
| a. What is the current actual amount of reserves being held by the bank? |
| b. Assuming a 7% required reserve ratio, what is the amount of the required reserves? |
| c. What is the value of the excess reserves (current reserves - required reserves) held at the Simpson National Bank? |
| d. What is the value of the money multiplier? |
| e. If the Simpson National Bank receives an additional demand deposit for $7,500, how much more could the bank be able to lend out as a result of this deposit? |
| f. If the Simpson National Bank is located in Salisbury, Maryland, which district is it in and what regional bank oversees the Simpson National Bank? |
| | Simpson National Bank Balance Sheet |
| Assets: | | | Liabilities: |
| Cash Reserves: | | | Deposits: |
| Vault Cash | | $ 5,000 | Currency | | | $ 55,000 |
| Deposit with Federal Reserve | | $ 17,000 |
| Loans: |
| Mortgage Loans | $ 84,000 | | Demand/Checkable Deposits | | | $ 30,000 |
| Business Loans | $ 165,000 | | Savings Accounts Deposits | | | $ 95,000 |
| Personal Loans | $ 29,000 | | Money Market Deposits | | | $ 120,000 |
| TOTAL LOANS OUTSTANDING | | $ 278,000 |
| TOTAL ASSETS: | | $ 300,000 | TOTAL LIABILITIES: | | | $ 300,000 |
| 2. Suppose that the bank decides to keep TWICE as much in reserves than what is required by law (6 points) |
| a. What is the new reserve ratio? |
| b. What is the new reserve total, including the additional demand deposit of $7,500? |
| c. What is the new value of the money multiplier? |
| 3. If the Federal Reserve wants to contract (decrease) the Money Supply, what would it do to each of the following to accomplish it's goal? (3 points) |
| a. Open Market Operations | Buy or Sell? |
| b. Required Reserve Ratio | Raise or Lower? |
| c. Discount Rate | Raise or Lower? |
| 4. Using the original numbers from the Simpson National Bank, calculate M1 and M2 (5 points) |
| M1 = |
| M2 = M1 + |
all4jasmine
Ch10MacroAsssignGraph.xlsx
