Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 25, Problem 9SQ
To determine
The impact of decreasing requires reserve ratio on the money multiplier.
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Students have asked these similar questions
The people in an economy have $20 million in money. Bank hold 1% of the deposits as reserves.
What is the money multiplier in this economy?
Bank managers lend the excess reserves created when new deposits come in because they want to
a. create new money in the economy.
b. earn a profit.
c. deplete required reserves.
d. deplete desired reserves.
a.
Assume that all the money is held as a deposit while banks keep 10% of the deposit as
a reserve. Estimate the money multiplier and money supply in the economy.
b.
Assume that the public is holding 40% of their assets as currency while depositing the
remaining in banks, while banks keep 10% of deposit as a reserve. Estimate the money
multiplier and money supply in the economy.
Chapter 25 Solutions
Economics For Today
Ch. 25.3 - Prob. 1YTECh. 25 - Prob. 1SQPCh. 25 - Prob. 2SQPCh. 25 - Prob. 3SQPCh. 25 - Prob. 4SQPCh. 25 - Prob. 5SQPCh. 25 - Prob. 6SQPCh. 25 - Prob. 7SQPCh. 25 - Prob. 8SQPCh. 25 - Prob. 9SQP
Ch. 25 - Prob. 10SQPCh. 25 - Prob. 11SQPCh. 25 - Prob. 1SQCh. 25 - Prob. 2SQCh. 25 - Prob. 3SQCh. 25 - Prob. 4SQCh. 25 - Prob. 5SQCh. 25 - Prob. 6SQCh. 25 - Prob. 7SQCh. 25 - Prob. 8SQCh. 25 - Prob. 9SQCh. 25 - Prob. 10SQCh. 25 - Prob. 11SQCh. 25 - Prob. 12SQCh. 25 - Prob. 13SQCh. 25 - Prob. 14SQCh. 25 - Prob. 15SQCh. 25 - Prob. 16SQCh. 25 - Prob. 17SQCh. 25 - Prob. 18SQCh. 25 - Prob. 19SQCh. 25 - Prob. 20SQ
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Similar questions
- If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, then: a. the money multiplier will increase and the supply of money in the economy will decrease. b. both the money multiplier and the supply of money in the economy will increase. c. the money multiplier will decrease and the supply of money in the economy will increase. d. All of the above.arrow_forward1arrow_forwardQuestion 3 – a. Distinguish between legally required reserves and excess reserves. b. Why don’t banks hold a 100 percent reserves? c. How is the amount of reserves bank hold related to the amount of money the banking system creates? d. Assume that Lucky Bank is required to hold a 10% deposits as reserves, and there is a $3000 increase in demand deposits. i. Calculate the money multiplier? ii. How much additional new demand deposits could the $3,000 deposit support?arrow_forward
- What are bank reserves? a.Deposits that are held in the form of gold reserves b.The fraction of deposits kept as currency that are not used for lending purposes c.The value of the owner’s equity in the bank d.The value of investments a bank keeps in excess of the value of deposits e.The sum of all loans a bank makes to borrowersarrow_forwardWhich of the following is money? A. A check is money because while it is in circulation the quantity of money increases by the amount of the check. B. Deposits are money, checks are not money, and credit cards are not money. C. A credit card is money because it allows you to take a loan at the instant you buy something. D. Currency is money and credit cards are money because they are means of payment, but deposits are not money.arrow_forwardThe 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?arrow_forward
- You take $500 that you held as currency and put it into the banking system. The reserve ratio is equal to 20%. 1. Calculate the money multiplier. 2. By how much will increase the total amount of deposits in the banking system? 3. By how much will increase the money supply?arrow_forwardDuring recessions, banks typically choose to hold more excess reserves relative to their deposits. This action A. Increases the money multiplier and increases the money supply B. Decreases the money multiplier and decreases the money supply C. Does not change the money multiplier, but increases the money supply D. Does not change the money multiplier but decreases the money supplyarrow_forwardMjarrow_forward
- If you withdraw $100 from your checking account and the required reserve ratio is 10 percent, then the bank's Instructions: Enter your responses as a whole number. a. Total deposits (Click to select) by $ b. Required reserves (Click to select) by $ c. Excess reserves (Click to select) by $arrow_forwardThe decrease in reserve requirements will: a. Increase the Money Multiplier b. Decrease the Money Multiplier c. Increase Velocity d. Decrease Velocityarrow_forwardSarah deposited in her checking account in bank A 10 million Dirhams. If the bank has zero dirhams in reserves and if the reserve ratio is 15 percent, then the bank has a. Excess reserves of 5 million Dirhams b. Excess reserves of 1,5 million Dirhams c. Required reserves of 8.5 million Dirhams d. None of the above.arrow_forward
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