Assume the public in Sylvania holds $4 billion in cash. All commercial banks are required...
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Finance
Assume the public in Sylvania holds $4 billion in cash. All commercial banks are required to hold 20% of their checking deposits as reserves. All banks in Sylvania are identical, and have the following identical balance sheets:
ASSETS
LIABILITES & BANK CAPITAL
Reserves
$ 50M
Checking Deposits
?
Loans
$ 300M
Net Worth
$ 150M
Assume that this balance sheet is complete, i.e., lists all assets and capital of these banks, and that the only liability of the banks is checking deposits.
What percentage of checking deposits is each of these banks holding as excess reserves?If the total money stock (supply) is $10B, find the total amount of reserves held by banks in the economy.
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