Suppose the currency-to-deposit ratio is 0.25, the excess reserve-to-deposit ratio is 0.05, and the required reserve ratio is 0.05. Which will have a larger impact on the money multiplier: a rise of 0.05 in the currency ratio or in the excess reserve ratio? Instructions: Enter your response rounded to two decimal places. Initially, the money multiplier is m=[ If the currency-to-deposit ratio rises to 0.3, the multiplier will be m-[ If, instead, the excess reserve-to-deposit ratio rises by 0.05, the money multiplier will be m So, multiplier falls by more with the increase in the (rick to select) currency-to-deposit ratio excess reserve-to-deposit ratio

Suppose the currency-to-deposit ratio is 0.25, the excess reserve-to-deposit ratio is 0.05, and the required reserve ratio is 0.05. Which will have a larger impact on the money multiplier: a rise of 0.05 in the currency ratio or in the excess reserve ratio? Instructions: Enter your response rounded to two decimal places. Initially, the money multiplier is m=[ If the currency-to-deposit ratio rises to 0.3, the multiplier will be m-[ If, instead, the excess reserve-to-deposit ratio rises by 0.05, the money multiplier will be m So, multiplier falls by more with the increase in the (rick to select) currency-to-deposit ratio excess reserve-to-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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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

Question

Suppose the currency-to-deposit ratio is 0.25, the excess reserve-to-deposit ratio is 0.05, and the required reserve ratio is 0.05. Which
will have a larger impact on the money multiplier: a rise of 0.05 in the currency ratio or in the excess reserve ratio?
Instructions: Enter your response rounded to two decimal places.
Initially, the money multiplier is m=[
If the currency-to-deposit ratio rises to 0.3, the multiplier will be m-[
If, instead, the excess reserve-to-deposit ratio rises by 0.05, the money multiplier will be m-|
So, multiplier falls by more with the increase in the
(Click to
currency-to-deposit ratio
excess reserve-to-deposit ratio

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