2. Consider the economy with only one bank. The table below gives the information of the...
2. Consider the economy with only one bank. The table below gives the information of the economy. Reserve ratio is 5% and constant.
| Amount of Stocks | 8000 |
| Amount of Bonds | 7000 |
| Amount of Currency | 2000 |
| Reserves of the Bank | 200 |
2.a. Answer how much the deposits in the bank is and how much the money supply in the economy is.
Deposits:
Money supply
Homework Answers
Question 2
(a)
Reserve ratio = 5% or 0.05
Reserve of banks = 200
Reserve ratio = Reserve/Deposits
0.05 = 200/Deposits
Deposits = 200/0.05
Deposits = 4,000
Thus,
The deposits is 4,000.
Calculate the money supply -
Money supply = Amount of currency + Deposits
Money supply = 2,000 + 4,000 = 6,000
Thus,
The money supply is 6,000.
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I know the answer, but i don’t know how to calculation.
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