Q-1 Suppose that the T-account for Sovereign Bank is as follows and the reserve requirements ratio is 20% ASSETS Cash Reserves Loans $ 1,000 $ 4,000 $ 5,000 LIABILITIES Demand Deposits $5,000 $5,000 a) What is the size of the money multiplier? b) With the present required ratio how much total money banking system can create?

Q-1 Suppose that the T-account for Sovereign Bank is as follows and the reserve requirements ratio is 20% ASSETS Cash Reserves Loans $ 1,000 $ 4,000 $ 5,000 LIABILITIES Demand Deposits $5,000 $5,000 a) What is the size of the money multiplier? b) With the present required ratio how much total money banking system can create?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter27: Money And Banking

Section: Chapter Questions

Problem 16RQ: How can a bank end up with negative net worth?

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