Homework Answers
1 - Banks create money with the help of money multiplier process. The money multiplier can be derived from the formula 1/ Reserve ratio. When the money is deposited in bank , some part is. Kept as reseve and other part is given as loan. Again when the loan is repaid , some part is kept as reserve and other is given as loan. This creates much more money supply as compared to initial deposit.
2 - Reserve ratio = 0.2
Money multiplier = 1/0.2
= 5
Initial deposit = $ 500.
When 500 are desposited in banks , $ 100 will kept as reserve and other $ 400 will be loaned off. When the loan of $ 400 is repaid , $ 80 will be kept as reserve and $ 320 will be loaned off. In this way total of $ 500*5
= $ 2500 money supply will be created.
In this 2500*0.2 = $ 500 will be reserve and $ 2000 will be amount of laons created
Add Answer to:
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I know the answer, but i don’t know how to calculation.
I know the answer, but i don’t know how to calculation.
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I know the answer, but i don’t know how to calculation.
1) If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.25, the deposits are and the money supply is_ 2) The money supply in Macroland is currently 2,500, bank reserves are 200, currency held by public is 500, and banks' desired reserve/deposit ratio is 0.10. Assuming the values of the currency held by the public and the desired reserve/deposit ratio do...
DJ. It has $559 in reserves and $9445 in loans. ? 2. The ability of banks to create money has its source in which of the following A. the 100 percent reserve requirement B. fractional-reserve banking (i.e. less than 100 percent reserve requirement) C. the ability of the government to mint as much currency as it wishes D. the banks' ability to issue currency (bank notes) of their own ? 3. Which of the following items is a liability to...
Need help with the bottom 1-4. Excess Reserve for #1 is 0. #2
is 10,000. #3 is 28,000. #4 is 0.
I. Depositors Money: 150.000 Banks Money: 0 Reserve Req. Ratio: 10% What is the: Actual Reserve Required Reserve Excess Reserve 2. Depositors Money: 200,000 Banks Money: 10,000 Reserve Req. Ratio: 15% What is the: Actual Reserve Required Reserve Excess Reserve 3. Depositors Money: 15,000 Banks Money: 20,000 Reserve Req. Ratio: 20% What is the: Actual Reserve Required Reserve Excess...
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