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Bank of Ecoville (Change in Monetary policy Solution)




Assignment 2: Changes In Monetary Policy;Assume that the Bank of Ecoville has the following balance sheet and the Fed has a 10% reserve requirement in place;BALANCE SHEET FOR ECOVILLE INTERNATIONAL BANK;ASSETS LIABILITIES;Cash $33,000 Demand deposits $99,000;Loans $66,000;Now assume that the Fed lowers the reserve requirement to 8%.;a. What is the maximum amount of new loans that this bank can make?;b. Assume that the bank makes these loans. What will the new balance sheet look like?;c. By how much has the money supply increased or decreased?;Explain your answers.;Text material is from;Mankiw, N.G. (2008). Principles of economics, 5th edition.;Chapters 29, 30, & 31;Assignment 2 Grading Criteria Maximum Points;Met the criteria for the correct responses to the questions assigned. 10;Used vocabulary relevant to this week's topics?at least five terms. 10;Submitted a well-structured report, free of spelling and grammatical errors and cited sources in APA format when necessary. 10;Justified ideas and responses by using appropriate examples and references from texts, Web sites, and other references or personal experience. 10;Total: 40


Paper#63969 | Written in 18-Jul-2015

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