eco hw help

HW 4 - Part 1 (50 points)

Due Date ( May 6th - Beginning of Class)

Question 1 (30 Points)

Suppose we have an economy with the amounts Monetary Base : $500 Cash : $200 Required Reserve Ratios : 20% (Part A) Assume that new loans are 100% deposited back to the Checking Deposits Account. Calculate the total amount in Checking Deposits, Reserves, Loans and the Money Supply (Ms) in the economy. (Show all your calculations. Follow the balance sheet methodology provided in the lectures and illustrate at least 3 steps showing the balance sheets of banks). (Part B) - This part follows Part A - Now assume that households want to deposit an extra $100 to their Checking Deposit Account. Calculate the total amount in Checking Deposits, Reserves, Loans and the Money Supply (Ms) in the economy. (Show all your calculations. Follow the balance sheet methodology provided in the lectures and illustrate at least 3 steps showing the balance sheets of banks). (Part C) - This part follows Part A (so ignore the scenario in part B) - Now assume that the households decided to deposit only 40% of the new loans back to the Checking Deposits Account. Calculate the total amount in Checking Deposits, Reserves, Loans and the Money Supply (Ms) in the economy. (Show all your calculations. Follow the balance sheet methodology provided in the lectures and illustrate at least 3 steps showing the balance sheets of banks).

Question 2 (20 Points)