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First National Bank

Assets Liabilities
Required Reserves - $7500 Demand Deposits - $50000
Excess Reserves - $18297 Owner's Equity - $4109
Loans - $26471 Debt - $3201
Bonds - $5042

1) What is the required reserve ratio?

2) What is the money multiplier?

3) If First National Bank loans out the rest of its available money, what is the maximum possible increase in the money supply?

4) If the Fed buys $1000 worth of bonds, what is the immediate increase in the money supply?

5) Given the Fed's action in (4) only, what is the maximum change in loans that banks can offer in the entire system?


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