In december 1994 a man in ohio decided to deposit all of the 8 million pennies he'd been saving for nearly 65 years. (his deposit weighed over 48,000 pounds!) with a reserve requirement of 9.5 percent, what will be the cumulative change for the banking system in: instructions: enter your responses rounded to the nearest whole number. in your calculations, round the multiplier to two decimals. (a) transactions deposits? $ (b) total reserves? $ (c) lending capacity? $

a) $80,000

b) $80,000

c) $762,105

Explanation:

a) Amount deposited = 8 million pennies whichbis equivalent to $80,000.

Since the man made a deposit of $80,000, it means that the transaction deposit has also increased by $80,000.

b) For total reserve:

The required reserve of the bank is 9.5%. In this case, it implies that the bank will keep 9.5% of the $80,000 as required reserve.

Therefore,

Required reserve = 0.095*80,000

= $7,600

The amount the bank will now use as loan or exces reserve wil be $72,400 ($80,000-$7,600).

Then we use the deposit multiplier to find the total reserves.

Deposit multiplier,

D = 1/reserve requirement

D = 1/0.095

D = 10.53

Therefore, total reserve will be:

Required reserve*deposit multiplier

= $7,600 x 10.53

= $80,000

c) Lending capacity:

Deposit multiplier = 10.526

The lending capacity will be

Deposit multiplier * excess reserve

Therefore

Lc = 10.526 * $72,400

= $762,105