02 ECO MC 38

Method 1
Fist of all, we can just imagine that the banks have $300 reserves. So, the deposits will be ($300/20%) = $1500. And the loans will become (1500-300) = $1200. Besides, the banks do not keep any excess reserves.
Secondly, after a person withdraws $100 from a bank. Then the reserves will become ($300-$100) = $200. So, the deposits will be ($200/20%) = $1000. And the loans will become (1000-200) = $800. At that time, the origanal loans are $1200. And now the new loans are $800. So, it means loans made by banks to the public will fall by at most ($1200-$800) = $400, if a person withdraws $100 from a bank.


We can use other numbers in the origanal reserves.
Method 2
Fist of all, we can just imagine that the banks have $600 reserves. So, the deposits will be ($600/20%) = $3000. And the loans will become (3000-600) = $2400. Besides, the banks do not keep any excess reserves.
If a person withdraws $100 from a bank. Then the reserves will reduce $100. And the decrease in total deposits will become ($100/20%) = $500. So, we can see that the reserves decreased $100 and the deposits decreased $500. So the loans will be decrease by ($500-$100) = $400.


Also,does change in money supply = change in loan?
Yes. Money supply means M1. It only recorded the Currency in Public Circulation(CC) + Demand Deposits(DD). When a person withdraws $100 from a bank, (CC) will increase $100. After that, the deposits from the banks decrease $500. So, (DD) will decrease $500. The money supply(M1) = +$100 + (-$500) = -$400. The *decrease in loans = $400 and the *decrease in money supply = $400. So, they are equal.


Is max change in deposit = max change in loan?
Max. change*(decrease) in deposits does not equal to Max. change*(decrease) in loans. We have calculated the max. change*(decrease) in deposits in Method1&2. It is $500. Also, we can concluded that the max. change*(decrease) in loans is $400. It is beacuse *(Deposits $500 - Reserves $100) = $400. So, they are not equal.

2009-01-13 00:45:27 補充：
change*(decrease) in money supply = change*(decrease) in loan

*****Star is means ver important*****

Remember do not use change, you must use decrease or increase or unchange.