1. Homework You will be assigned teams of 4 people.
Answer the following problems (25 pts each)
$100 is deposited in a bank. The Fed has a 7% reserve requirement, the remainder may be loaned. The person receiving the loan then deposits it in a second bank with the same requirements. This continues for 5 total people. How much total money has been injected into the system by the original $100? You must show your work.
What happens if the reserve requirement becomes 5% or 9%?
If you are the Fed what would you do to reduce the threat of inflation?
If you are the Fed, what would you do to boost the economy?
The homework is due in one week.
One or more groups will present their results.
Use the homework template from the class web site.