Consider the following situations.a. Bank reserves are $100, the public holds $200 in currency, and the desired reserve-deposit ratio is 0.25. Find deposits and themoney supply.Instructions: Enter your responses as whole numbers.Deposits: $Money supply:b. The money supply is $500 and currency held by the public equals bank reserves. The desired reserve-deposit ratio is 0.25. Findcurrency held by the public and bank reserves.Instructions: Enter your responses as whole numbers.Currency held by the public: $Bank reserves:c. The money supply is $1,250, of which $250 is currency held by the public. Bank reserves are $100. Find the desired reserve-depositratio.Instructions: Enter your response rounded to one decimal place.Desired reserve-deposit ratio:

A) Deposits computed as, => (Reserve / reserve deposit ratio) Therefore, Deposits $100/0.25 =…

Lonsider the following situations. a. Bank reserves are $100, the public holds $200 in currency, and the desired reserve-deposit ratio is 0.25. Find deposits and th money supply. Instructions: Enter your responses as whole numbers. Deposits: Money supply: $ b. The money supply is $500 and currency held by the public equals bank reserves. The desired reserve-deposit ratio is 0.25. Fine currency held by the public and bank reserves. Instructions: Enter your responses as whole numbers. Currency held by the public: $1 Bank reserves: C. The money supply is $1,250, of which $250 is currency held by the public. Bank reserves are $100. Find the desired reserve-depo ratio. Instructions: Enter your response rounded to one decimal place. Desired reserve-deposit ratio:

Lonsider the following situations. a. Bank reserves are $100, the public holds $200 in currency, and the desired reserve-deposit ratio is 0.25. Find deposits and th money supply. Instructions: Enter your responses as whole numbers. Deposits: Money supply: $ b. The money supply is $500 and currency held by the public equals bank reserves. The desired reserve-deposit ratio is 0.25. Fine currency held by the public and bank reserves. Instructions: Enter your responses as whole numbers. Currency held by the public: $1 Bank reserves: C. The money supply is $1,250, of which $250 is currency held by the public. Bank reserves are $100. Find the desired reserve-depo ratio. Instructions: Enter your response rounded to one decimal place. Desired reserve-deposit ratio:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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?
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Suppose that banks hold $20 billion in total reserves and the public holds $5 billion A. Calculate the maximum amount that the bank can lend. B. Calculate the money supply M2. C. As Eid approaches, customers witharaw $1 billion from their bank accounts. Calculate the money supply M2 after the withdrawals D. From your results in C, what can you conclude about the impact of bank withdrawals on money supply. cash. Required reserves ratio R = 25% For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS A 2 エ%G Q Paragraph Arial 10pt
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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?