In Macroland there is 1,400 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 10%, a) Currency held by public in Macroland equals b) Bank deposits in Macroland equal c) Money Supply in Macroland equals

In Macroland there is 1,400 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 10%, a) Currency held by public in Macroland equals b) Bank deposits in Macroland equal c) Money Supply in Macroland equals

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter13: The Federal Reserve System

Section: Chapter Questions

Problem 3QP

See similar textbooks

Related questions

Q: For the money multiplier to decrease, which of the following events would have to occur? A) a…

A: Money multiplier measures the proportional rise or decline in final income as a result of capital…

Q: Calculate the value of currency with public if M1 is $1,55,612 , demand deposits is 68,000 and other…

A: The information being given is as follows:- M1 = $1,55,612 Demand deposit = 68,000 Other deposit…

Q: Assume that the quantity theory of money and relative PPP both hold. Output growth is 3% in the U.S.…

A: Purchasing power parity is a method of comparing the absolute purchasing power of currencies by…

Q: What is the effect of the following on the money supply? i. Increase in currency–deposit ratio,…

A: Money supply is the total money in an economy, which includes the currency in circulation, money…

Q: What is the effect of the following on the money supply: a. Increase in currency- deposit ratio,…

A: For answering this one need to know about CDR(Currency Deposite Ratio) and Reserve Deposite Ratio.…

Q: In the hypothetical country of Middlelandia, banks are required to hold 20% of checkable deposits as…

A: Round Deposits Required Reserves of (20%) Excess Reserves New loans None of the loan…

Q: The largest component of the money supply (M1) is Multiple Choice currency in bank vaults.

A: It refers to the total money amount circulating in an economy at a given point in time. Central…

Q: Assume no change in currency holdings as deposits change. A banking system with target reserve ratio…

A: Excess reserves are capital reserves held by a bank or monetary foundation in excess of what is…

Q: S Do 10 20 30 40 50 60 Quantity (millions of hours per year) In the figure above, Do is the demand…

A: Answer: (a). have no effect on the market. Explanation: Since the current market wage (equilibrium…

Q: A new deposit of $3,000 is made in the banking system with the reserve-deposit ratio r = 15% and the…

A: Total deposits created refers to the total amount of new deposits that are created in the banking…

Q: Ašsümė the following: i. The public holds no currency. ii. The ratio of reserves to deposits (0) is…

A: Money demand can be defined as the amount of money that the domestic residents of a country wants to…

Q: In the hypothetical country of Eastlandia, banks are required to hold 10% of checkable deposits as…

A: The money multiplier is the ratio of two variables namely money supply and the monetary base. It…

Q: If the required reserve ratio is 8%, the excess reserve ratio is 2%, and the currency-deposit ratio…

A: Money multiplier = 1+ c / r + e + c c = currency-deposit ratio r = required reserve ratio e =…

Q: Suppose, in Bangladesh, commercial banks have current account deposits of 4600 crore taka. Their…

A: The following problem has been answered as follows:

Q: Commercial banks have a target reserve ratio of 30 percent and there is a cash drain of 20 percent.…

A: The reserve ratio is the percentage of deposits that banks are required to hold in reserve, either…

Q: An initial deposit of $10,000 at a ratio of 10% from currency in circulation, will lead to a maximum…

A: Given Initial deposit D=$10,000 Required reserve ratio =10% In the money market, there are two…

Q: In an economy with commercial banks with the required ratio of the reserve to deposit of 0.2, an…

A: Total units generated = Initial deposit * Money multiplier

Q: Suppose you are the only currency holder in an economy, and you have $220 in currency. What would…

A: Money supply includes all the liquid currency in the economy. It includes both cash and deposits.…

Q: Assume that individuals do not hold currency. If the reserve ratio is equal to 5 cent, then if the…

A: Required reserve ratio is the minimum requirement of reserve that banks are needed to hold which…

Q: The economy of Elmendyn contains 900 $1 bills. If people hold all money as currency, the…

A: Hey, thank you for the question. According to our policy we can only answer up to 3 subparts per…

Q: If the currency deposit ratio is 20 percent, the reserve ratio rr is 20 percent and each bank loans…

A: The money multiplier shows the proportionate change in the money supply when the deposits or the…

Q: Explain how to use an open market operation to expand the money supply.

A: Money supply refers to the total sum of money held by the public in the economy at a point in time.…

Q: n the hypothetical country of Westlandia, banks are required to hold 20% of checkable deposits as…

A: The central banks require all the commercial banks to hold some percentage of the deposits with them…

Q: Assume no change in currency holdings as deposits change. A banking system with target reserve ratio…

A: "Money supply is under the control of the central bank. When the central bank purchases government…

Q: You are given the following information: Bank deposits (D) 350 Currency-to-deposits ratio (c) 0.20…

A: (Since you have asked many questions, we will solve the first one for you. If you want any specific…

Q: If the required reserve ratio (RRR) in U.S. is 10 percent and you deposit $5,000, which is wired…

A: Using the concept of Money Multiplier - The money multiplier (M) is the inverse of the required…

Q: Suppose that a $100 purchase of government bonds by the U.S. Federal Reserve causes a $200 increase…

A: Federal reserve uses open market operations to change money supply. Fed buys bonds to increase money…

Q: 6. a) UK currency is a commercial bank liability b) UK currency is a Bank of England liability c) UK…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: The reserve requirement is 25%, and the banking system receives a new $1,000 deposit. The bank does…

Q: Imagine that the Bank of Canada creates $1,000 of new money. Canadians do not hold any of their…

A: Given: Creation of money by Bank of Canada is $1000. Reserve Requirement = 20% Excess Reserves = 5%

Q: Supply of money refers to the currency held by the central bank of the country True/False

A: At a perticular period of time, the stock of money in total held by the people is refferd to be as…

Q: Suppose that in a hypothetical Country XYZ, the required reserve ratio is 2%, currency in…

A: The overall amount of currency in circulation in the hands of people, or in terms of deposits in…

Q: Suppose that the required reserve ratio is equal to 10%. If the currency-to-deposit ratio is fixed…

A: Reserve require is the amount of money kept as reserve as per central bank guideline , and…

Q: “Whenever currency is deposited in a commercial bank, cash goes out of circulation and, as a result,…

A: The money supply in the economy of a nation on the date calculated is both the currency and other…

Q: When currency is equal to $100 billion and reserves are equal to $200 billion, and we know that the…

A: In macroeconomics, the cash supply or money supply alludes to the absolute volume of money held by…

Q: Consider an economy, where the monetary base is 30 billion pesos. Banks keep 25% of deposits in…

A: Monetary base= 30 billion Banks reserve rate=25% Monetary base= R+C 90%= reserve 10%= currency

Q: Solve for the level of bank reserves (R) in this economy. Solve for the money supply level (M) in…

A: Solution: Given Data: Bank deposits (D) = 350, Currency-to deposits ratio (c) = 0.20 Required…

Q: Suppose the monetary båse is $5 currency-deposit ratio is 30%. What would the excess reserve ratio…

A: The money supply refers to the amount of cash or currency circulating in an economy. Here, we…

Question

In Macroland there is 1,400 in currency. The public holds half of the currency and banks hold the rest as
reserves. If banks' desired reserve/deposit ratio is 10%,
a) Currency held by public in Macroland equals
b) Bank deposits in Macroland equal
c) Money Supply in Macroland equals

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Given Information

VIEW

Step 2: Solution

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Suppose that in a hypothetical Country XYZ, the required reserve ratio is 2%, currency in circulation is RM130 billion, the amount of demand deposits is RM420 billion, and excess reserves are RM5 billion.(a) Calculate the money supply (M1), the currency deposit ratio, the excess reserve ratio, and the money multiplier of Country XYZ. (b) Suppose the Central Bank of Country XYZ conducts an open market purchase of bonds held by banks of RM200 billion to boost its economy due to the covid19 pandemic. Assuming the ratios you calculated in part (a) remain the same, except that banks choose to hold all of their proceeds as excess reserves rather than loan them out. Predict the effect onM1 in Country XYZ.
5) Suppose, in Bangladesh, commercial banks have current account deposits of 4600 crore taka. Their reserves are 1100 crore taka, 25% of which are in deposits with the Bangladesh Bank (BB). Households and firms hold 800 crore taka as cash and coins. a) Calculate the monetary base (MB) b) Calculate the narrow money (M1) c) Calculate the cash reserve ratio (CRR).
Assume that the currency-deposit ratio is 0.5, the required reserve ratio is 0.1, and the excess reserves to deposit ratio is 0.15. If the monetary base is $2 trillion, find (a) the amount of currency in circulation in billions of dollars; (b) required reserves in billions of dollars (c) excess reserves in billions of dollars.
“Whenever currency is deposited in a commercial bank, cash goes out of circulation and, as a result, the supply of money is reduced.” Do you agree? Explain why or why not.
Suppose, in Bangladesh, commercial banks have current account deposits of 4600 crore taka. Theirreserves are 1100 crore taka, 25% of which are in deposits with the Bangladesh Bank (BB).Households and firms hold 800 crore taka as cash and coins.a) Calculate the monetary base (MB)b) Calculate the narrow money (M1)c) Calculate the cash reserve ratio (CRR).
In an economy with commercial banks with the required ratio of the reserve to deposit of 0.2, an individual's initial deposit of 1000 units at a commercial bank will eventually generate..
You are given the following information: Bank deposits (D) 350 Currency-to-deposits ratio (c) 0.20 Required reserve ratio (rr) 0.15 Solve for the monetary base level (B) in this economy. Solve for the level of bank reserves (R) in this economy. Solve for the money supply level (M) in this economy. Suppose there is a sudden rise in the currency-to-deposits ratio, from the original level of 0.2 to a new level of 0.4. If everything else remains unchanged, find the level of monetary base needed to keep money supply fixed at the level you solved for in part c. Continue to consider c=0.4. Find the level of required reserve ratio needed to keep the monetary base and the money supply fixed at the level you solved or in parts a and c, respectively.
Match the function of money with the definition
Supply of money refers to the currency held by the central bank of the country True/False
The economy of Elmendyn contains 2000 $1 bills. a) If people hold all money as currency, what is the quantity of money supply ? b) If people hold all money as demand deposit and banks maintains 100% reserves what is quantity of money? c) if people equal amount of currency and demand deposits and bank maintains 100% reserves, what is quantity of money? d) If people hold all money as demand deposits and bank maintaines reserve ratio of 10% what is the quantity of money? e) If the people holds equal amount of currency and demand deposit and banks maintains reserve ratio of 10%, what is the quantity of money?
An initial deposit of $10,000 at a ratio of 10% from currency in circulation, will lead to a maximum change in the composition of the money supply by?
If the currency deposit ratio is 20 percent, the reserve ratio rr is 20 percent and each bank loans out the maximum fraction of new deposit it receives, then an increase in $1 in the monetary base would lead to an icnrease in the money supply of $4 $2 $3 $1