Question

Consider the following situations. a. Bank reserves are $100, the public holds $200 in currency, and the desired reserve-deposit ratio is 0.25. Find deposits and the money supply Instructions: Enter your responses as integer values. Deposits: Money supply: b. The money supply is $500 and currency held by the public equals bank reserves. The desired reserve-deposit ratio is 0.25. Find currency held by the public and bank reserves. Instructions: Enter your responses as integer values. Currency held by the public: Bank reserves C. The money supply is $1,250, of which $250 is currency held by the public. Bank reserves are $100. Find the desired reserve-deposit ratio. Instructions: Enter your response rounded to one decimal place. Desired reserve-deposit ratio:

Answer 1

O) (a) Given - Bank Reserves Cwouncy Reserve - debesit ration $100 200 0,25 Deposits Bank Reserves Reserwe - deposit. ratio $ 400 $ 100 0.25 $ 400 : Deposits = Money supply Cwerency held by public + Deposits $ 200 + $ 400 $ 600 400 600 $ Debesita Money Supply Money = $ 500 (6 Given. supply Bank Reserves Currenty = Bank Reserves meserwe - Deposit viatis = 0,25 a be cuore zet Deposits Bank Reserves Reserwe - deposit ratio x Deposits 0.25 Money supply Currencyent deposits CS Scanned with CamScanner

Page No. $ 500 xt 2 0.25 0,25 x + x 500 X 0.25 - U 1.252 125 = 125 1:25 $ 100 = Bank reserves = $ 100 Currency Currency held 100 by public = $ Bank Reserves $ 100 (c) Given: - Money Supply Currency = $ 1,250 $ 250 Bank reserves $ 100 Money supply Currency_t_ Deposits $ 1.250 + deposits Deposits = $250 $1,250 $1,000 $250 Reperve-Deposit_ratio = Bank Reserves Deposits 100 0.10 looo = 0.10 - Reserve - Deposit_ratio CS Scanned with CamScanner