Use the following data for a banking system and expand it to its limits. (i. e., exhaust excess reserves) Prepare a new balance sheet and determine TR and RR after expansion.
1. Rd = 10%
2. Rt = 1%
3. The public wishes to hold $4 in time deposits for each $1 in demand deposits.
4. The public wishes to hold $0.35 in currency for each $1 in demand deposits
5. The banking system will hold excess reserves of 1% on all demand deposits in excess of $4,000,000, but none on the initial $4,000,000.
ASSETS?LIABILITIES
Cash?$300,000?Demand Deposits?$1,000,000
FR Acct? 200,000?Time Deposits? ? 4,000,000
Loans & Sec. 4,500,000