16. Suppose banks are required to hold 20% of deposits as reserves. What is the simple...
16. Suppose banks are required to hold 20% of deposits as reserves. What is the simple
deposit multiplier?
A. 0.02
B. 0.2
C. 5
D. 20
Homework Answers
Option C.
The formula for deposit multiplier is as below,
Deposit multiplier = 1/Required Reserve Ratio
= 1/0.2
= 5
Hence option c is selected.
Add Answer to:
16. Suppose banks are required to hold 20% of deposits as
reserves. What is the simple...
The Federal Reserve specifies a percentage of checkable deposits that banks hold must hold as reserves...
The Federal Reserve specifies a percentage of checkable deposits that banks hold must hold as reserves (required reserves), which is called the required reserve ratio. Excess reserves are reserves that banks hold over and above the required reserves and can make loans. Suppose that Bank A has an increase in checkable deposits of $100 million and the required reserve is 10%. How much money can Bank A create by making loans? How much money can the banking system as a...
Suppose, in an economy, currency in circulation (C) is $16 billions, reserves (R) held by banks...
Suppose, in an economy, currency in circulation (C) is $16 billions, reserves (R) held by banks are $4 billions, and deposits (D) by people and firms in banks are worth $ 84 billions. If there are no excess reserves, then (a) What is the money supply (M) in the economy? _______________ (b) What is the monetary base (MB)? _______________ (c) What is the currency deposit ratio ? _______________ (d) What is the reserve deposit ratio? _______________ (e) What is the...
Suppose, in an economy, currency in circulation (C) is $16 billions, reserves (R) held by banks...
Suppose, in an economy, currency in circulation (C) is $16 billions, reserves (R) held by banks are $4 billions, and deposits (D) by people and firms in banks are worth $ 84 billions. If there are no excess reserves, then (a) What is the money supply (M) in the economy? _______________ (b) What is the monetary base (MB)? _______________ (c) What is the currency deposit ratio ? _______________ (d) What is the reserve deposit ratio? _______________ (e) What is the...
serves. What is the simple deposit multiplier? The simple deposit multiplier is O A. the ratio...
serves. What is the simple deposit multiplier? The simple deposit multiplier is O A. the ratio of the amount of deposits created by banks to the amount of new reserv OB. the ratio of the amount of deposits created by banks to the amount of already existing reserves. OC. the ratio of the amount of new reserves to the amount of deposits created by banks. OD. the percentage of checkable deposits that the Fed specifies that banks must hold as...
Suppose that the reserve requirement for checking deposits is 20 percent and that banks do not...
Suppose that the reserve requirement for checking deposits is 20 percent and that banks do not hold any excess reserves. If the Fed sells $3 million of government bonds, the economy’s reserves bymillion, and the money supply will bymillion. Now suppose the Fed lowers the reserve requirement to 15 percent, but banks choose to hold another 5 percent of deposits as excess reserves. True or False: The money multiplier will decrease. True False True or False: As a result, the...
The level of bank deposits is $9,681 and the banks hold $1,046 in required reserves and...
The level of bank deposits is $9,681 and the banks hold $1,046 in required reserves and 765 in excess reserves. If the Fed introduces $100 worth of new reserves worth of new reserves in the economy by how much will the money supply increase.
Assume that banks do not hold excess reserves and that households do not hold currency
Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $400. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. A higher reserve requirement is associated with a _______ money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that...
Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits.
8. The reserve requirement, open market operations, and the moneysupply Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $400. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. A higher reserve requirement is associated with a _______ money supply. Suppose the Federal Reserve wants to increase the...
61 Suppose the required reserve ratio is 40% and all banks do not hold excess reserves....
61 Suppose the required reserve ratio is 40% and all banks do not hold excess reserves. I Michael deposits S2000 cash in his current account (1) the money supply MI will immediately decrease by $2.000 (2) the maximum increase in bank deposits will be SS 000 (3) the maximum increase in bank loans will be 52 000 A. (1) only B. (2) only c. (1) and (2) only D. (1), (2) and (3) 11 the ability of deposit creation of...
2. Suppose that the banks of the nation of Atlantis have a reserve ratio of 20%,...
2. Suppose that the banks of the nation of Atlantis have a reserve ratio of 20%, and there is a new deposit of $500, and that the people of Atlantis have no desire to hold currency. a) Complete the following table. Round Deposits Required Reserves Excess Reserves Loans 1 $500 $100 $400 $400 2 $400 3 4 5 6 7 8 9 10 Total after 10 rounds b) What is the money multiplier?
serves. What is the simple deposit multiplier? The simple deposit multiplier is O A. the ratio of the amount of deposits created by banks to the amount of new reserv OB. the ratio of the amount of deposits created by banks to the amount of already existing reserves. OC. the ratio of the amount of new reserves to the amount of deposits created by banks. OD. the percentage of checkable deposits that the Fed specifies that banks must hold as...
61 Suppose the required reserve ratio is 40% and all banks do not hold excess reserves. I Michael deposits S2000 cash in his current account (1) the money supply MI will immediately decrease by $2.000 (2) the maximum increase in bank deposits will be SS 000 (3) the maximum increase in bank loans will be 52 000 A. (1) only B. (2) only c. (1) and (2) only D. (1), (2) and (3) 11 the ability of deposit creation of...
Most questions answered within 3 hours.
-
Prepare a short memo that incorporates the followings elements.
Using charts / tables where applicable. •...
asked 20 seconds ago -
You do some further dragon genetic research and find the
following
Fire breathing (Fb) and the...
asked 12 minutes ago -
An investment pays you an annual 20% nominal interest rate
compounded semiannually (10 percent twice a...
asked 3 minutes ago -
Ch.10
10) American Paging Inc., is the seventh
largest paging company in the united states. In...
asked 21 minutes ago -
A study by a corporation revealed that the mean weekly salary
for managers in department A...
asked 32 minutes ago -
Considering the migration patterns of the genus Homo,we learned
that one of the following statements is...
asked 50 minutes ago -
we want to evaluate the effectiveness of an assertiveness
training program.people selected adjectives from a list...
asked 56 minutes ago -
Expression of eukaryal DNA in bacterial cells requires the
insertion of ________ into the plasmid expression...
asked 1 hour ago -
A business strategy :
-Clearly identifies the firm's target market and
broadly indicates what the operations...
asked 1 hour ago -
Instead of spectrometry, ion chromatography will be used to
determine the concentration of nitrate in wastewater....
asked 1 hour ago -
A 75.0-mL volume of 0.200 mol L−1 NH3 (Kb=1.8×10−5) is titrated
with 0.500 mol L−1 HNO3....
asked 1 hour ago -
A man is standing on a scale inside an elevator in Flushing, NY.
His weight is...
asked 1 hour ago