a) What do we mean by fractional reserve banking? b) Banks are required to have specie equal to 12.5% of the currency they have in circulation, Assume banks hold no excess reserves. Banks have $2000 in specie. What is the volume of bank notes in circulation? Are notes full bodied or partial backed? c) What is a demand deposit? Why did banks switch from issuing currency to creating demand deposits?
a) What do we mean by fractional reserve banking? b) Banks are required to have specie equal to 12.5% of the currency they have in circulation, Assume banks hold no excess reserves. Banks have $2000 in specie. What is the volume of bank notes in circulation? Are notes full bodied or partial backed? c) What is a demand deposit? Why did banks switch from issuing currency to creating demand deposits?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- a) What do we mean by fractional reserve banking?
b) Banks are required to have specie equal to 12.5% of the currency they have in circulation, Assume banks hold no
c) What is a demand deposit? Why did banks switch from issuing currency to creating demand deposits?
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