Question

QUESTION 1

Refer to this scenario for all of the questions on this problem set.

BALANCE SHEET OF A MONOPOLY BANK
ASSETS	LIABILITIES AND CAPITAL
Reserves: 500 Loans and Securities: 4,500 Other Assets: 1,000 Total Assets 6,000	Checkable Deposits: 5,000 Capital: 1,000 Total Liabilities & Capital 6,000

 

The balance sheet of the only bank in a simple economy is shown below. The reserve requirement is 10%. If cash in the hands of the non-bank public is $3,000, the Money Supply = ___________________.

 

QUESTION 2

 

BALANCE SHEET OF A MONOPOLY BANK
ASSETS	LIABILITIES AND CAPITAL
Reserves: 500 Loans and Securities: 4,500 Other Assets: 1,000 Total Assets 6,000	Checkable Deposits: 5,000 Capital: 1,000 Total Liabilities & Capital 6,000

 

Suppose people deposit $1,000 of their cash into checking accounts. In the balance sheet below, enter the new totals in all of the accounts, immediately following the transaction, before the bank does any new lending.

ASSETS	LIABILITIES AND CAPITAL
Reserves: Loans and Securities: Other Assets: 1,000 Total Assets:	Checkable Deposits   Capital Total Liabilities and Capital:

 

QUESTION 3

Recall that cash in the hands of the non-bank public was initially equal to $3,000. Thus, immediately following the $1,000 deposit, currency in the hands of the non-bank public = _____________

QUESTION 4

And Deposits = ______________