|
Assets
|
Liabilities
|
|
Total Reserves
|
$50,000
|
Demand Deposits
|
$180,000
|
|
U.S. Government Bonds
|
$110,000
|
|
|
|
Loans
|
$20,000
|
|
|
Assume the balance sheet above is for Eastlandia National Bank. The reserve requirement is 20%.
- Given the current situation, how much money can Eastlandia National Bank lend to borrowers if it wants to keep all of its bonds?
- Based on your answer in part (a), how much additional money can Eastlandia National Bank create? (Remember, how means how and why.)
- Explain two reasons why the money supply may not increase by the amount you identified in part (b).