in the economy of Nocoin the banks have deposits of $400 bilion Their reserves are $80 billion, two thirds of which is in deposits with the central bank Households and frms hold $20 billion in banknotes (dollarbills). There are no coins!Calculate the banks' desired reserve ratio and the currency drain ratio (as percentages)The banks' desired reserve ratio ispercentThe currency drain ratio is percent

Reserve requirements are central bank registrations that set the minimum amount that a commercial…

in the economy of Nocoin the banks have deposits of $400 bilion. Their res bills). There are no coins! reserves are $80 billion, two thirds of which is in deposits with the central bank. Households and firms hold $20 billion in bank notes (dollar Calculate the banks' desired reserve ratio and the currency drain ratio (as percentages) The banks' desired reserve ratio ispercent The currency drain ratio ispercent

in the economy of Nocoin the banks have deposits of $400 bilion. Their res bills). There are no coins! reserves are $80 billion, two thirds of which is in deposits with the central bank. Households and firms hold $20 billion in bank notes (dollar Calculate the banks' desired reserve ratio and the currency drain ratio (as percentages) The banks' desired reserve ratio ispercent The currency drain ratio ispercent

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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I'm stuck on this one. One side of me says that the answer should be bank reserves to deposits but the other side is leaning towards the money supply to the monetary base; Please help!!
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Which quotation is irrelevant to the claim in paragraph 1 that "people have confidence that the money will hold its value because their government backs it"? "The Mint was charged with producing the nation's specie in copper, silver, and gold. O For the first 50 years or so, U.S. currency consisted almost entirely of coins." (paragraph 13) "Demand notes could be redeemed for silver or gold coins on demand and were legal tender guaranteed by the federal government." (paragraph 14) O "Most nations today back their own currencies as legal tender." (paragraph 15) O "Paper notes often consist of higher values than coins." (paragraph 15)
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Banks in New Transylvania have a desired reserve ratio of 10 percent of deposits and noexcess reserves. The currency drain ratio is 50 percent of deposits. Now suppose that thecentral bank increases the monetary base by $900 billion.i. How much do the banks lend in the first round of the money creation process?ii. How much of the initial amount loaned flows back to the banking system as newdeposits?iii. How much of the initial amount loaned does not return to the banks but is heldas currency?iv. Why does a second round of lending occur?
What is the ratio of reserves to deposits that a bank finds prudent to hold? Describe the situation in which a bank has $10 million in actual reserves and $8 million in desired reserves. The ratio of reserves to deposits that a bank finds prudent to hold is its _______. When a bank has $10 million in actual reserves and $8 million in desired reserves, it has _______. A. desired deposit ratio; a shortage of deposits B. desired reserve ratio; surplus reserves C. desired reserve ratio; insufficient reserves D. planned reserve ratio; a currency drain
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Banks in New Transylvania have a desired reserve ratio of 10 percent of deposits and noexcess reserves. The currency drain ratio is 50 percent of deposits. Now suppose that thecentral bank increases the monetary base by $900 billion.i. How much do the banks lend in the first round of the money creation process?ii. How much of the initial amount loaned flows back to the banking system as newdeposits?iii. How much of the initial amount loaned does not return to the banks but is heldas currency?iv. Why does a second round of lending occur?v. Calculate money multiplier in this example?vi. What is the final increase in the quantity of money?
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