Identifying the Excess Reserve and Drawing the Federal Funds Market

1 If total deposits = 300. And reserve requirement ratio (r) is 1% and total reserves = 50 and total currency = 6.
1 What is e?
Excess reserve = total reserve- required reserve
The required reserve is given by 0.01*300=3.
E= 50-3 =47.
2 what is c?
c=currency/deposit= 6/300= 0.02.
3 what is m
m=1/required reserve= 1/0.01 = 10
4 what is MB
MB = currency + deposit = 6 +300 = 306
5 what is MS
MS = m * MB = 10 * 306 = 3060.
2 The Federal Reserve has set the discount rate at 2%. It pays 1% on Reserves. The current Federal Funds Rate is 1.5%.
6 Draw the Federal Funds Market
3 Imagine private banks decide the economy is looking good and decide to greatly increase their lending. In fact they decide to hold n...