Asked by
rylee bynum
on Dec 17, 2024
Verified
Refer to Table 29-4. Assume the Fed's reserve requirement is 6 percent and all banks besides the Bank of Cheerton are exactly in compliance with the 6 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Cheerton decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase?
A) $22,500.00
B) $30,572.69
C) $32,526.93
D) $30,000.00
Reserve Requirement
The minimum amount of reserves that a bank must hold against its deposits as mandated by central banking regulations, affecting the bank's capacity to lend.
Excess Reserves
The funds that banks hold over and above the required minimum set by central banking authorities, often seen as an indicator of the banking system's health.
Money Supply
The total amount of monetary assets available in an economy at a specific time, including both cash and digital money.
- Acknowledge the influence of Federal Reserve activities on bank reserves and the monetary supply.
Verified Answer
JB
Learning Objectives
- Acknowledge the influence of Federal Reserve activities on bank reserves and the monetary supply.