Question Details

Prepare a two- to three-page analysis by answering the questions below. Be 
sure to cite your references using APA format. 
 
Assume that the Bank of Ecoville has the following balance sheet and the Fed 
has a 10% reserve requirement in place:
 

BALANCE SHEET FOR ECOVILLE INTERNATIONAL 
BANK

ASSETS	
LIABILITIES
Cash   $33,000   	Demand deposits $99,000
Loans $66,000	 
 
Now assume that the Fed lowers the reserve requirement to 8%.
 
1.	What is the maximum amount of new loans that this bank can make?
2.	Assume that the bank makes these loans. What will the new balance sheet look 
like?
3.	By how much has the money supply increased or decreased? 

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