In the hypothetical country of Westlandia, banks are required to hold 20% of checkable deposits as reserves, and the public holds 50% of the loans as currency in circulation and redeposits the remaining 50% percent of the loans. Round Deposits Required Reserves of 20% Excess Reserves New Loans 50% of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 100 400 400 200 200 2 400 80 320 320 160 160 3 320 64 256 256 128 128 4 256 51.2 204.8 204.8 102.4 102.4 5 204.8 40.96 163.84 163.84 81.92 81.92 6 163.84 32.76 131.08 131.08 65.54 65.54 7 131.08 26.21 104.87 104.87 52.43 52.43 8 104.87 20.97 83.9 83.9 41.95 41.95 9 83.9 16.77 67.13 67.13 33.56 33.56 10 67.13 13.44 53.69 53.69 26.84 26.84 Totals 2,231.62 446.31 1,785.31 1,785.31 892.19 892.19 In the hypothetical country of Middlelandia, banks are required to hold 20% of checkable deposits as reserves, and the public holds none of the loans as currency in circulation and redeposits all of the loans. Round Deposits Required Reserves of 20% Excess Reserves New Loans None of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 100 400 400 400 400 2 400 80 320 320 320 320 3 320 64 256 256 256 256 4 256 51.2 204.8 204.8 204.8 204.8 5 204.8 40.96 163.84 163.84 163.84 163.84 6 163.84 32.76 131.07 131.07 131.07 131.07 7 131.07 26.21 104.85 104.85 104.85 104.85 8 104.85 20.97 83.88 83.88 83.88 83.88 9 83.99 16.77 67.22 67.22 67.22 67.22 10 67.22 13.44 53.77 53.77 53.77 53.77 Totals 2,231.77 446.31 1,785.31 1,785.31 1,785.31 1,785.31 In the hypothetical country of Eastlandia, banks are required to hold 10% of checkable deposits as reserves, and the public holds none of the loans as currency in circulation and redeposits all of the loans. Round Deposits Required Reserves of 10% Excess Reserves New Loans None of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 50 450 450 0 450 2 450 45 405 405 0 405 3 405 40.50 364.50 364.50 0 364.50 4 364.50 36.45 328.05 328.05 0 328.05 5 328.05 32.81 295.25 295.25 0 295.25 6 295.25 29.52 265.72 265.72 0 265.72 7 265.72 26.57 239.15 239.15 0 239.15 8 239.15 23.91 215.23 215.23 0 215.23 9 215.23 21.52 193.71 193.71 0 193.71 10 193.71 19.37 174.34 174.34 0 174.34 Totals 3,256.61 325.65 2,930.95 2,930.95 0 2,930.95 1. Describe in detail the differences between the three hypothetical countries money supplies, money multipliers, and likely impacts on each economy.

In the hypothetical country of Westlandia, banks are required to hold 20% of checkable deposits as reserves, and the public holds 50% of the loans as currency in circulation and redeposits the remaining 50% percent of the loans. Round Deposits Required Reserves of 20% Excess Reserves New Loans 50% of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 100 400 400 200 200 2 400 80 320 320 160 160 3 320 64 256 256 128 128 4 256 51.2 204.8 204.8 102.4 102.4 5 204.8 40.96 163.84 163.84 81.92 81.92 6 163.84 32.76 131.08 131.08 65.54 65.54 7 131.08 26.21 104.87 104.87 52.43 52.43 8 104.87 20.97 83.9 83.9 41.95 41.95 9 83.9 16.77 67.13 67.13 33.56 33.56 10 67.13 13.44 53.69 53.69 26.84 26.84 Totals 2,231.62 446.31 1,785.31 1,785.31 892.19 892.19 In the hypothetical country of Middlelandia, banks are required to hold 20% of checkable deposits as reserves, and the public holds none of the loans as currency in circulation and redeposits all of the loans. Round Deposits Required Reserves of 20% Excess Reserves New Loans None of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 100 400 400 400 400 2 400 80 320 320 320 320 3 320 64 256 256 256 256 4 256 51.2 204.8 204.8 204.8 204.8 5 204.8 40.96 163.84 163.84 163.84 163.84 6 163.84 32.76 131.07 131.07 131.07 131.07 7 131.07 26.21 104.85 104.85 104.85 104.85 8 104.85 20.97 83.88 83.88 83.88 83.88 9 83.99 16.77 67.22 67.22 67.22 67.22 10 67.22 13.44 53.77 53.77 53.77 53.77 Totals 2,231.77 446.31 1,785.31 1,785.31 1,785.31 1,785.31 In the hypothetical country of Eastlandia, banks are required to hold 10% of checkable deposits as reserves, and the public holds none of the loans as currency in circulation and redeposits all of the loans. Round Deposits Required Reserves of 10% Excess Reserves New Loans None of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 50 450 450 0 450 2 450 45 405 405 0 405 3 405 40.50 364.50 364.50 0 364.50 4 364.50 36.45 328.05 328.05 0 328.05 5 328.05 32.81 295.25 295.25 0 295.25 6 295.25 29.52 265.72 265.72 0 265.72 7 265.72 26.57 239.15 239.15 0 239.15 8 239.15 23.91 215.23 215.23 0 215.23 9 215.23 21.52 193.71 193.71 0 193.71 10 193.71 19.37 174.34 174.34 0 174.34 Totals 3,256.61 325.65 2,930.95 2,930.95 0 2,930.95 1. Describe in detail the differences between the three hypothetical countries money supplies, money multipliers, and likely impacts on each economy.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Round	Deposits	Required Reserves of 20%	Excess Reserves	New Loans	50% of loan proceeds are held as currency in circulation by people	Loan proceeds redeposited
1	$500	100	400	400	200	200
2	400	80	320	320	160	160
3	320	64	256	256	128	128
4	256	51.2	204.8	204.8	102.4	102.4
5	204.8	40.96	163.84	163.84	81.92	81.92
6	163.84	32.76	131.08	131.08	65.54	65.54
7	131.08	26.21	104.87	104.87	52.43	52.43
8	104.87	20.97	83.9	83.9	41.95	41.95
9	83.9	16.77	67.13	67.13	33.56	33.56
10	67.13	13.44	53.69	53.69	26.84	26.84
Totals	2,231.62	446.31	1,785.31	1,785.31	892.19	892.19

In the hypothetical country of Middlelandia, banks are required to hold 20% of checkable deposits as reserves, and the public holds none of the loans as currency in circulation and redeposits all of the loans.

Round	Deposits	Required Reserves of 20%	Excess Reserves	New Loans	None of loan proceeds are held as currency in circulation by people	Loan proceeds redeposited
1	$500	100	400	400	400	400
2	400	80	320	320	320	320
3	320	64	256	256	256	256
4	256	51.2	204.8	204.8	204.8	204.8
5	204.8	40.96	163.84	163.84	163.84	163.84
6	163.84	32.76	131.07	131.07	131.07	131.07
7	131.07	26.21	104.85	104.85	104.85	104.85
8	104.85	20.97	83.88	83.88	83.88	83.88
9	83.99	16.77	67.22	67.22	67.22	67.22
10	67.22	13.44	53.77	53.77	53.77	53.77
Totals	2,231.77	446.31	1,785.31	1,785.31	1,785.31	1,785.31

In the hypothetical country of Eastlandia, banks are required to hold 10% of checkable deposits as reserves, and the public holds none of the loans as currency in circulation and redeposits all of the loans.

Round	Deposits	Required Reserves of 10%	Excess Reserves	New Loans	None of loan proceeds are held as currency in circulation by people	Loan proceeds redeposited
1	$500	50	450	450	0	450
2	450	45	405	405	0	405
3	405	40.50	364.50	364.50	0	364.50
4	364.50	36.45	328.05	328.05	0	328.05
5	328.05	32.81	295.25	295.25	0	295.25
6	295.25	29.52	265.72	265.72	0	265.72
7	265.72	26.57	239.15	239.15	0	239.15
8	239.15	23.91	215.23	215.23	0	215.23
9	215.23	21.52	193.71	193.71	0	193.71
10	193.71	19.37	174.34	174.34	0	174.34
Totals	3,256.61	325.65	2,930.95	2,930.95	0	2,930.95

1. Describe in detail the differences between the three hypothetical countries money supplies, money multipliers, and likely impacts on each economy.

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