CE 07-07

Study the following balance sheet of a banking system:

Suppose the legal reserve ratio is 20%.

(a) The excess reserve of the banking system is $_______________. (1 mark)

(b) Suppose Mr Chan withdraws $100 from the banking system, of which 70% is held as cash and the rest is remitted overseas.

(i) The immediate change in total deposits of the banking system is _______________. (1 mark)

(ii) Therefore, the immediate change in the overall amount of the money supply is _______________. (2 marks)