1. Assume that Banc One receives a primary deposit of $1 million. The bank must keep reserves of 20 percent against its deposits. Prepare a simple balance sheet of assets and liabilities for Banc One immediately after the deposit is received.
2. Assume a financial system has a monetary base of $25 million. The required reserves ratio is 10 percent, and there are no leakages in the system.
a.What is the size of the money multiplier?
b.What will be the system's money supply?
3. Assume that last year the Australian dollar was trading at $.5527, the Mexican peso at $.1102, and the United Kingdom (British) pound was worth $1.4233. By this year the U.S. dollar value of an Australian dollar was $.7056, the Mexican peso was $.0867, and the British pound was $1.8203. Calculate the percentage appreciation or depreciation of each of these three currencies between last year and this year.