6 Philippines Central Bank (BSP) plans to increase the RequiredReserve Ratio (RRR) of banks from 2% to 3% in July 2021.Reserves by banks in BSP=100, Gov't securities of BSP=400. Loansto Bank. You may use T1&T2 below to facilitate your problem solvingT1 Required Reserve Ratio 0.02 (PHP Billion)BSP Balance SheetASSETSGovt'SecuritiesLoans to banksLIABILITIESReservesCashMoney MultiplierBSPASSETSGovt'SecuritiesLoans to banksLIABILITIESReservesCash400Money Multiplier100100T2 Required Reserve Ratio 0.03 (PHP Billion)400100100COMM'L BANKS' Balance SheetASSETSReservesVLoansLIABILITIESDepositsLoans owed to BSP(M1-Cash+deposit)COMM'L BAMKSASSETSReservesLoansLIABILITIESDepositsLoans owed to BSP(M1-Cash-deposit)Given RRR = .02, how many times will deposit in banks be compared to Reserves?[Select]2Given RRR = .02, how much loans, in pesos, can the banks extend to their borrowers?[Select]Given RRR = .02, BSP plans to reduce loans to banks to PHP50 billion. How muchloans can bank extend? [Select]When RRR is increased from 2% to 3%, what is the effect on M1?[Select]V

Information are extracted from T1 and T2 RRR=0.02=2% Loan given to commercial bank=100 From T2…

Philippines Central Bank (BSP) plans to increase the Required Reserve Ratio (RRR) of banks from 2% to 3% in July 2021. Reserves by banks in BSP=100, Gov't securities of BSP=400. Loans to Bank. You may use T1&T2 below to facilitate your problem solving T1 Required Reserve Ratio 0.02 (PHP Billion) BSP Balance Sheet ASSETS Govt'Securities Loans to banks LIABILITIES Reserves Cash Money Multiplier BSP ASSETS Govt'Securities Loans to banks LIABILITIES Reserves Cash 400 Money Multiplier 100 100 T2 Required Reserve Ratio 0.03 (PHP Billion) 400 100 COMM'L BANKS' Balance Sheet 100 ASSETS Reserves Loans LIABILITIES Deposits Loans owed to BSP (M1=Cash+deposit) COMM'L BAMKS ASSETS Reserves Loans LIABILITIES Deposits Loans owed to BSP (M1-Cash deposit) 2

Philippines Central Bank (BSP) plans to increase the Required Reserve Ratio (RRR) of banks from 2% to 3% in July 2021. Reserves by banks in BSP=100, Gov't securities of BSP=400. Loans to Bank. You may use T1&T2 below to facilitate your problem solving T1 Required Reserve Ratio 0.02 (PHP Billion) BSP Balance Sheet ASSETS Govt'Securities Loans to banks LIABILITIES Reserves Cash Money Multiplier BSP ASSETS Govt'Securities Loans to banks LIABILITIES Reserves Cash 400 Money Multiplier 100 100 T2 Required Reserve Ratio 0.03 (PHP Billion) 400 100 COMM'L BANKS' Balance Sheet 100 ASSETS Reserves Loans LIABILITIES Deposits Loans owed to BSP (M1=Cash+deposit) COMM'L BAMKS ASSETS Reserves Loans LIABILITIES Deposits Loans owed to BSP (M1-Cash deposit) 2

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.2P

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Calculate the value of money multiplier and the total deposit created if the initial amount is $800 million and LRR is 10%.
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