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money creation and control

A bank has:

25 in reserves at the Fed
15 in AtM cash
60 in Gov't securities
100 in Loans

90 in demand deposits
110 in savings deposits

required reserve ratio is 5%

so if there is no currency drain and if all the funds loaned remained deposited in the First Student Bank, what is the quanity of loans and total deposits when teh bank has no excess reserves?

Solution Preview

The bank's total deposit = demand deposits + savings deposits = 90+110=200
The required reserve = reserve ratio * deposits = 5% * 200 = 10
When the bank has no excess reserve, it will ...

Solution Summary

A discussion of money creation and control ensues.

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