Purchase Solution

money creation and control

Not what you're looking for?

Ask Custom Question

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 quantity of loans and total deposits when the bank has no excess reserves?

Purchase this Solution

Solution Summary

A discussion of money creation and control ensues.

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 ...

Purchase this Solution


Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.