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Help me understand this Economics question please, ” If a single bank is holding $1,000,000 in required reserves and the reserve requirement is reduced from 25% to 20%, the bank will be able to lend what additional amount? (Reconstructing this bank’s T-account will help you answer this question.) a. $10,000. f. $500,000. b. $50,000. g. $1,000,000. c. $100,000. h. $$4,000,000. d. $200,000. i. $5,000,000. e. $250,000. j. Who knows?
A bank has $5000 in vault cash, $15,000 in reserves on deposit with the Fed, $3000 in gold, $1000 in U.S. government securities, and $1000 in other securities, and $105,000 in demand deposit liabilities. The reserve requirement for this bank is 20%. In this situation, what will tend to happen with this bank?
a. a loan for $15,000 will be made.
b. a loan for $5,000 can be made.
c. $1,000 in loans must be called

in.
d. $5,000 in loans must be called in.
e. the money supply will shrink by $25,000.
f. the money supply will increase by $25,000.
g. the money supply will increase by $5,000.
h. the money supply will decrease by $5,000. Answer: .
Given the situation in the question above, what will happen to the money supply for the banking system as a whole? (Use the same set of answers.)
Answer: .
3. Assume that I move $1000 from my credit union savings account to my checking account at the same credit union. Indicate whether the following statements will be true or false:
a. As a result of this, the amount of currency will decrease. T F (Circle one)
b. The level of M1 will rise. T F (Circle one)
c. The level of M2 will rise. T F
econ100.hw5.doc
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