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

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%.

By how much has the money supply increased or decreased?
If the money multiplier is 5, how much money will ultimately be created by this event?
If the Fed wanted to implement a contractionary monetary policy using reserve requirement, how would that work?

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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 LIABILI…

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