Q1: You take $500 that you held as currency and put it into the banking system. The reserve ratio is
equal to 20%.[1.5 Marks]
Q2: At the beginning of 2018, a town has 152,000 employed people and 8000 unemployed people.
The remaining 40,000 people in the town are not in the labor force.[1.5 Marks]
Based on these numbers:
Q3: Suppose that the T-account for First National Bank is as follows: –[2 Marks]
undefined undefined undefined
|The First National Bank|
A)If the Fed requires banks to hold 5 percent of deposits as reserves, how much in excess reserves does First National Bank now hold?
B)Assume that all other banks hold only the required amount of reserves. If First National decides to reduce its reserves to only the required amount, by how much would the economy’s money supply increase?
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