2. a. Commerce Bank is very conservative. Its finance chief, Ms. Hathaway, insists the bank always hold 1.75% in excess reserves and the bank currently has $1.35 billion in loans.
Clampett Securities just deposited $103 million in Commerce as proceeds from the Fed’s repurchase of treasury securities.
If the required reserve ratio is 8.25%, how much total money will be created? What is the money multiplier?
How much in total deposits and total reserves will Commerce Bank have after Clampett Securities deposits then $103 million?