2%
of deposits as excess reserves. However, no banks in the economy want to hold excess reserves and people only hold deposits and no currency. Its balance sheet is given by:
Given the information provided in the balance sheet, the reserve requirement ratio is
(round up to two decimals)
and the value of the deposit multiplier is
(round up to two decimals).
Excess reserves for Bank Du Lhut are
!
When Bank Du Lhut lends out all of its excess reserves, deposits ultimately increase by $
Supposing that banks hold no excess reserves and the Federal Reserve Bank injects US $
20,000
into the banking system, the money supply will increase by $