Consider again the same economy with two banks: Bank One and Bank Two. Partial balance sheet information for each is given below:Bank One:$120,000 demand deposits$15,000 total reserves on hand$30,000 equityBank Two:$3000 Deposit in the Fed$10,000 total reserves on hand$8000 US government bonds$80,000 demand depositsIn addition to the above information, members of the public hold $15,000 in cash, and the central bank requires that banks hold 10% of checking as required reserves (as in all class examples).Calculate the monetary base (for the whole economy), using its high powered money definition.

Introduction High powered money is consist as monetary base in an economy. It is produced by the…

Answered: Consider again the same economy with…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Consider again the same economy with two banks: Bank One and Bank Two. Partial balance sheet information for each is given below:

Bank One:
- $120,000 demand deposits
- $15,000 total reserves on hand
- $30,000 equity
Bank Two:
- $3000 Deposit in the Fed
- $10,000 total reserves on hand
- $8000 US government bonds
- $80,000 demand deposits

In addition to the above information, members of the public hold $15,000 in cash, and the central bank requires that banks hold 10% of checking as required reserves (as in all class examples).

Calculate the monetary base (for the whole economy), using its high powered money definition.

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