Use the following information 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 $1,000,0000, but none on the first $1,000,000.
ASSETS LIABILITIES
Cash $300,000 Demand Deposits $1,000,000
FR Acct 200,000 Time Deposits 4,000,000
Loans & Sec 4,500,000