Prepare a 2-3 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



Required: 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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