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You have decided to deposit $2,000 in a savings account

24 / 01 / 2019 Assignments

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You have decided to deposit $2,000 in a savings account

question: You have decided to deposit $2,000 in a savings account in the Commonwealth Bank, which does not have any excess reserves at the time when you make a deposit.a:How does your deposit change the Bank’s T-account? Show the T-account changes. (1 mark)b: Now the Bank is told to maintain a reserve ratio of 0.2 (ie, 20 percent). The Bank decides to make the maximum possible loan from the deposited funds. Following from the T-account in Part a), what does the T-account look like now? (1 mark)c: Now, somebody who took out the loan in Part b) writes a cheque for the amount and then the person receiving the cheque deposits it in WestPac Bank which also maintains a reserve ratio of 0.2. Show how this changes the T-account of WestPac Bank. (1 mark)d: If the process of money creation continues what is the total money supply resulting from your initial $2,000 deposit? (1 mark


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