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 M1 money supply, using the simplified definition, for the whole economy.
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 M1 money supply, using the simplified definition, for the whole economy.
Chapter15: Money Creation
Section: Chapter Questions
Problem 17SQ
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Consider again the same economy with two banks: Bank One and Bank Two. Partial
- 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
Calculate the M1 money supply, using the simplified definition, for the whole economy.
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