Given the following ratios, show how money multiplies and the total increase in money supply if the monetary base (MH) increases by $520. Your answer should include the changes in currency in circulation (C), deposits (D), required reserves (R) and loans disbursed by commercial bank (L). b=C/D=0.25 X=R/D=0.12

Given the following ratios, show how money multiplies and the total increase in money supply if the monetary base (MH) increases by $520. Your answer should include the changes in currency in circulation (C), deposits (D), required reserves (R) and loans disbursed by commercial bank (L). b=C/D=0.25 X=R/D=0.12

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter15: Money Creation

Section: Chapter Questions

Problem 9SQ

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a) Suppose that Tk.10,000 in new taka bills (never seen before) falls magically from the sky into your hands. What are the minimum increase and the maximum increase in the money supply that may result? Assume the required reserve ratio is 10 percent.b) Suppose you receive Tk. 10,000 from your grandmother and deposits the money in a saving account. your grandmother gave you the money by writing a check on her saving account. Would the maximum increase in the money supply still be what you found it to be in part a) where you received the money from the sky? Why or why not? c) Suppose that instead you getting Tk. 10,000 from the sky or a check through your grandmother, you get the money from your mother who had buried it in a can in her backyard. In this case, would the maximum ncrease in the money supply be what you found it to be in part a)? Why or why not?
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