Macroeconomics
Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 13, Problem 5WNG
To determine

The change in money supply.

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The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 20% of the deposits as reserves. What is the money multiplier in this economy?
A deposit of $100 was made to the bank as we know the money supply won't increase until the bank loans the $100. If the required reserve ratio is 6%, how much will the money supply ultimately increase once this new deposit has gone all the way through the system? What is the money multiplier in this case?
Say that First Commercial Bank has reserves of $100, loans at $400 and checkable deposits of $500. The required reserve ratio is 10%. If the bank has a deposit outflow of $40, is the bank in violation of the required reserve ratio? What is the maximum amount of deposit outflow the bank can sustain without violating the ratio?
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