Problem
• Suppose that Mountain Star Bank discovers that its reserves will temporarily fall slightly below those legally required. How might it temporarily remedy this situation through the Federal funds market? Now assume Mountain Star finds that its reserves will be substantially and permanently deficient. What remedy is available to this bank?
• How would a decrease in the reserve requirement affect the (i) size of the money multiplier, (ii) amount of excess reserves in the banking system, and (iii) extent to which the system could expand the money supply through the creation of checkable deposits via loans?
• Suppose that Serendipity Bank has excess reserves of $8,000 and checkable deposits of $150,000. If the reserve ratio is 20 percent, what is the size of the bank's actual reserves?
• The Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $5000 in currency into the bank and that currency is added to reserves. What level of excess reserves does the bank now have?
The response should include a reference list. Using one-inch margins, Times New Roman 12 pnt font, double-space and APA style of writing and citations.