(a.) Reserve requirement for banks is set at 5%. Your firm deposits its profits of $28,000 into the Third National Bank. How much excess reserve does your deposit generate for the bank?

What is the maximum amount of new money that can be created in the banking system as a result of this deposit? Show all work.

(b.) What is the Federal Funds Rate in the banking system?E Explain how the Fed manipulates this rate in order to achieve macroeconomic objectives.

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Tod ThielLv2

19 Apr 2019

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(a.) Reserve requirement for banks is set at 5%. Your firm deposits its profits of $28,000 into the Third National Bank. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

How much excess reserve does your deposit generate for the bank?

What is the maximum amount of new money that can be created in the banking system as a result of this deposit? Show all work.

(b.) What is the Federal Funds Rate in the banking system?

Explain how the Fed manipulates this rate in order to achieve macroeconomic objectives.

(a.) Third National Bank is fully loaned up with reserves of$30,000 and demand deposits equal to $100,000. The reserve ratio is5%. Households deposit $20,000 in currency into the bank. How much excess reserves does the bank now have, and what is the maximum amount of new money that can be created in the banking system as a result of this deposit? Show all work.

(b.) What is the fed funds rate in the banking system? Explain how the Fed manipulates this rate to achieve macroeconomic objectives.