Suppose that currency in circulation is $600 billion, the amount of chequable deposits is $900 billion, and excess reserves are $15 billion. Next month, the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Required: Calculate the excess reserves, the excess reserve ratio, the money supply, and the money multiplier?

Suppose that currency in circulation is $600 billion, the amount of chequable deposits is $900 billion, and excess reserves are $15 billion. Next month, the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Required: Calculate the excess reserves, the excess reserve ratio, the money supply, and the money multiplier?

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter15: Money Creation

Section: Chapter Questions

Problem 9SQP

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Similar questions

Humongous Bank is the only bank in the economy. The people in this economy have 20 million in money, and they deposit all their money in Humongous Bank. Humongous Bank decides on a policy of holding 100 reserves. Draw a T-account for the bank. Humongous Bank is required to hold 5 of its existing 20 million as reserves, and to loan out the rest. Draw a T-account for the bank after it has made its first round of loans. Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original 19 million loan?
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Explain how to use the discount rate to expand the money supply.
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