FED Analysis
Assume that the Financial institution of Ecoville has the next stability sheet and the Fed has a 10% reserve requirement in place:Stability Sheet for Ecoville Worldwide BankASSETSLIABILITIESCash$33,000Demand Deposits$99,000Loans66,000Required:Now assume that the Fed lowers the reserve requirement to eight%.What's the most quantity of recent loans that this financial institution could make?Assume that the financial institution makes these loans. What is going to the brand new stability sheet seem like?By how a lot has the cash provide elevated or decreased?If the cash multiplier is 5, how a lot cash will finally be created by this occasion?If the Fed needed to implement a contractionary financial coverage utilizing reserve requirement, how would that work?