Someone help me do this plz.. i'll pay too (1) (a) The commercial banking system has $720 billion in demand deposit liabilities and $70 billion in reserves. The legal reserve ratio is 9%. What is the maximum expansion in the money supply that can take place? Show your calculations!
(b) Assume the commercial banking system has $800 billion in checkable deposits and $68 billion in reserves. The legal reserve ratio is 8%. To what level would the reserve ratio have to be changed to "wipe out" the money- creating ability of the banking system?
(2) Assume the commercial banking system has $800 billion in checkable deposits and $64 billion in reserves. The legal reserve ratio is 8%.Then the central bank buys $4 billion worth of government securities. (Give numerical answers!)
(a) What will be the immediate effect on the deposit liabilities of the commercial banking system?
(b) What will be the immediate effect on the reserves of the commercial banking system?
(c) What will be the immediate effect on the excess reserves of the commercial banking system?
(d) What is the maximum (total) expansion in the money supply that can occur as a result of the central bank's action?
(3) Assume that the General Motors Acceptance Corporation (GMAC) enters the ?open market? and buys $2 billion worth of government securities, the ultimate seller being TIAA, the pension fund for professors. Assume that Citibank is GMAC?s bank and Chase is TIAA?s bank. Explain carefully, using numbers, what this will do to:
(a) The deposit liabilities of Citibank, Chase and the whole banking system.
(b) The reserves of Citibank, Chase and the whole banking system.
(c) The excess reserves of Citibank, Chase and the whole banking system.
(d) The money supply of the country.
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