Question

Bank of Cheerton Assets Liabilities Reserves $4,200 Deposits $60,000 Loans 55,800 Refer to Table 29-4. Assume the Fed's reserve requirement is 5 percent and all banks besides the Bank of Cheerton are exactly in compliance with the 5 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) $24,000.00 b) $17,142.86 c) $24,926.97 d) $26,871.29

          Bank of Cheerton
Assets Liabilities
Reserves $4,200 Deposits $60,000
Loans 55,800
Refer to Table 29-4. Assume the Fed's reserve requirement is 5 percent and all banks besides the Bank of Cheerton are exactly in compliance with the 5 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) $24,000.00
b) $17,142.86
c) $24,926.97
d) $26,871.29

Bank of Cheerton
Assets Liabilities
Reserves 4,200 Deposits60,000
Loans 55,800
Refer to Table 29-4. Assume the Fed's reserve requirement is 5 percent and all banks besides the Bank of Cheerton are exactly in compliance with the 5 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) 24,000.00
b)17,142.86
c) 24,926.97
d)26,871.29

Added by Christopher B.

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