Question 1 Answer :
(A):-
=> M1 is the measurement for money supply in economy.
M1 include currency and notes , Demand deposit , travellers check etc.
here M1 = currency + demand deposits
= $50 billions + $1 trillions
= $1.05TRILLIONS
so M1 is $1.50 trillions
(B):-
legally reserve required = total deposit * reserve ratio
= $1 trillions *0.10
= $100 billions reserve is legally
(C):-
Total reserve should lend by banks is excess reserve
Excess reserve = total reserve - required reserve
= $100 billions - $100 billions
= 0
so the Bank can not lend reserve any amount because no any excess reserve.
U.S. Economy Data Value $100 Billion $50 Billion $1 Billion $30 Billion Category Total Reserves (asset...
Total reserves (private banks) $100 billion, Currency (firms, households) $50 billion, Value of Euros in the U.S. (private banks, firms, households) $1 billion; Gov't bonds (private banks, firms, households) $30 billion; demand deposits (Private banks) $1 trillion; Certificates of deposit, CDs (private banks) $10 billion; Reserve requirement on demand deposits 0.10. Question: what is the money supply (M1) and the amount of reserves that banks are required to keep? Thanks, Kiki
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