
(a)
To compute:
The

Answer to Problem 13P
The
Explanation of Solution
The required reserve created by $100,000 if the bank faces the requirement of reserve ratio of 10%:
The required reserve created by$100,000if the bank faces the requirement of reserve ratio of 20%:
The required reserve created by$100,000 if the bank faces the requirement of reserve ratio of 25%:
The required reserve created by$100,000 if the bank faces the requirement of reserve ratio of 50%:
Required reserve:
It refers to a certain amount of cash from the deposits that banks need to keep according to the guidelines of central bank.
Required reserve is calculated by,
Here, RR is required reserve, r is percentage of required reserve and D is the total amount in
deposits.
Excess reserve:
The holding of reserves in excess by the banks or financial institutions than what is required by the regulators, creditors or internal controls is termed as excess reserve or capital reserve.
Money multiplier:
It calculates the potential amount of money a bank generates with each dollar of reserves.
Where, R is required reserve.
(b)
To compute:
The additional dollar that can be lent out as a result of $100,000 deposit for the given reserve requirements.

Answer to Problem 13P
The additional dollar that can be lent out as a result of $100,000 deposit if the bank faces the given reserve requirements is as shown below:
Explanation of Solution
If the initial deposit is
Calculation for excess reserve:
If the initial deposit is
Calculation for excess reserve:
If the initial deposit is
Calculation for excess reserve:
If the initial deposit is
Calculation for excess reserve:
Working note:
The required reserve created by
The required reserve created by
The required reserve created by
The required reserve created by
Required reserve:
It refers to a certain amount of cash from the deposits that banks need to keep according to the guidelines of central bank.
Required reserve is calculated by,
Here, RR is required reserve, r is percentage of required reserve and D is the total amount in
deposits.
Excess reserve:
The holding of reserves in excess by the banks or financial institutions than what is required by the regulators, creditors or internal controls is termed as excess reserve or capital reserve.
Money multiplier:
It calculates the potential amount of money a bank generates with each dollar of reserves.
Where, R is required reserve.
(c)
To compute:
The additional dollar that can be created by bank in response of a $100,000 deposit for the given reserve requirements.

Answer to Problem 13P
The additional dollar that can be created as a result of
Explanation of Solution
Potential money can be calculated for reserve ratio of
Potential money can be calculated for reserve ratio of
Potential money can be calculated for reserve ratio of
Potential money can be calculated for reserve ratio of
Working note:
Calculation of money multiplier for reserve ratio of 10%:
Calculation of money multiplier for reserve ratio of 20%:
Calculation of money multiplier for reserve ratio of 25%:
Calculation of money multiplier for reserve ratio of 50%:
Required reserve:
It refers to a certain amount of cash from the deposits that banks need to keep according to the guidelines of central bank.
Required reserve is calculated by,
Here, RR is required reserve, r is percentage of required reserve and D is the total amount in
deposits.
Excess reserve:
The holding of reserves in excess by the banks or financial institutions than what is required by the regulators, creditors or internal controls is termed as excess reserve or capital reserve.
Money multiplier:
It calculates the potential amount of money a bank generates with each dollar of reserves.
Where, R is required reserve.
Want to see more full solutions like this?
Chapter 17 Solutions
Exploring Macroeconomics
- Not use ai pleasearrow_forwardB G C D E H M K Armchair For puzzles 96 and 97, use the first phylogenetic tree on the following page (Figure 2). 96) Who is the most recent common ancestor of species A and species G? 97) Who is the most recent common ancestor of species D, E, and F?arrow_forwardNot use ai pleasearrow_forward
- Not use ai pleasearrow_forwardStealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The banks loans, if sold at current market value, would be worth $600 million. What is the total value of Stealth bank's assets? I believe my calculation of 1.3 billion may be incorrect May I have my work checked pleasearrow_forwardThe following graph shows the downward-sloping demand curve for Oiram-46, a monopolist producing unique magic hats. The graph also shows Oiram-46's marginal revenue curve and its average total cost curve. On the following graph, use the orange point (square symbol) to indicate the profit-maximizing quantity. Use the blue point (circle symbol) to indicate the profit-maximizing price. Use the purple point (diamond symbol) to indicate the average total cost. Use the tan rectangle (dash symbol) to show Oiram-46's total revenue and the grey rectangle (star symbol) to show its total cost. PRICE (Dollars per magic hat) 2 0 20 Marginal Cost 18 ATC 16 Profit-Maximizing Quantity 14 12 Profit-Maximizing Price MC 8 Demand 02 4 6 8 10 12 14 16 18 20 QUANTITY (Magic hats per week) Based on the graph, Oiram-46's profit is equal to 5 TOTAL SCORE: 1/4 Average Total Cost Total Revenue Total Cost Grade Step 2 (to complete this step and unlock the next step)arrow_forward
- Explain information regarding the effective interest rates being charged and how much higher the rent-to-own stores’ cash price exceeded the price of the identical item at a reputable retail outlet.arrow_forwardHow can Rent-to-own industries avoid the restrictions on interest rates? Explain.arrow_forwardExplain why rent-to-own operations are so attractive to so many people compared to saving the money to buy the desired item or going to a thrift store to acquire the item?arrow_forward
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, IncPrinciples of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
- Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage LearningBrief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning





