unit 4: Reserve requirment

March 10, 2016

Reserve requirment
-The fed requires banks to always have some money readily available to meet consumers demand for cash
-around,set by the fed is required reserve ratio
-RRR is the % of the demand deposits (checking account balances) loaned out
-typically the required reserve ratio = 10% 

3 types of multiple deposit expansion

• type 1- calculate initial change in excess reserves (amount single bank can loan from initial deposit)
• type 2- calculate the change in loans in banking system
• type 3- calculate the change in the money supply (sometimes 2 and 3 will have the same result) IF NO FEDS IS INVOLVED 

I. bank can lend ER

II. total change

III. owner equity