7 Suppose a banking system has $ 125,000 of checkable deposits and actual reserves of $17,000. If the reserve ratio is 9% Excess Reserves in the banking system are equal to: $(Put only numbers in your answer; do not put a dollar sign in your answer.)Your Answer:AnswerQuestion 69Suppose a banking system has $ 120,000 of checkable deposits and actual reserves of $16,000. If the reserve ratio is 6% the banking system can expand the supply of money by a(Put only numbers in your answer, do not put a dollar sign in your answer.)

The reserve ratio is the portion of reservable liabilities that commercial banks must hold onto, rather than lend out or invest. This is a requirement determined by the country's central bank, which in the United States is the Federal Reserve. It is also known as the cash reserve ratio. Checkable deposits = $125,000 Actual Reserves = $17,000 Required reserve ratio = 9%. So, it means the bank need to keep 9% of the checkable deposits as reserves. 9% of $125,000 = $11,250 (Required Reserve) Excess Reserve = Actual Reserve – Required Reserve Excess Reserve = $17,000 – $11,250 Excess Reserve = $5,750 Part 2) We have the following information Checkable deposits = $120,000 Actual reserves = $16,000 Required reserve ratio = 6%. So, it means the bank need to keep 6% of the checkable deposits as reserves. 6% of $120,000 = $7,200 (Required Reserve) The banking sector can expand the supply of money through the excess reserves. Money Supply = Excess Reserve × Money Multiplier Money Multiplier = 1/Required Reserve Ratio = 1/0.06 = 16.67 Excess Reserve = Actual Reserve – Required Reserve Excess Reserve = $16,000 – $7,200 Excess Reserve = $8,800 Money Supply = Excess Reserve × Money Multiplier Money Supply = $8,800 × 16.67 Money Supply = $146,696

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Question 69 Suppose a banking system has $ 120,000 of checkable deposits and actual reserves of $ 16,000. If the reserve ratio is 6% the banking system can expand the supply of money by a maximum of $ (Put only numbers in your answer: do not put a dollar sign in your answer)

Question 69 Suppose a banking system has $ 120,000 of checkable deposits and actual reserves of $ 16,000. If the reserve ratio is 6% the banking system can expand the supply of money by a maximum of $ (Put only numbers in your answer: do not put a dollar sign in your answer)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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