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tealgoose371Lv1

28 Sep 2019

If the reserve requirement (rr) is 0.2, what is the simple deposit multiplier? If, in addition, the currency deposit ratio (c) is 0.05 and the excess reserve ratio (e) is 0.15, what is the money multiplier? Explain why the money multiplier differs from the simple deposit multiplier.

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28 Sep 2019

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Related questions

Suppose the following data apply:

Toal bank reserve: $34 billion

Total bank deposit $600 billion

Cash help by public $200 billion

Bonds held by public $220 billion

Stock held b public $140 billion

Gross domestic products $ trillion

Intrest rate 6 %

Require reserve ratio: 0.05

(a) How large is the money supply?

(b) How much excess reserves are there?

(d) What is the availble lending capacity?

Analyze the effects of reserves and the money multiplier.

What do banks usually create when they possess excess reserves?

What factors limit the amount they can create?

As the required reserve ratio (R) increases and the currency drain ratio stays constant, does the money multiplier increase or decrease? Why? Explain your reasoning.

Consider the following information about the banking system:

Reserves (R) = $500 billion

Currency (C) = $400 billion

Required Reserves (RR) = $80 billion

Required Reserve Ratio (r) = 0.1

a. What is the value of excess reserves in the banking system?

b. What is the value of deposits in the banking system?

c. What is the value of the money supply (M1)?

d. What is the size of the monetary base?

e. What is the value of the money multiplier? What does it tell us?

f. If the excess reserve ratio increases by 0.06, while the value of the required reserve ratio and currency to deposits ratio stay the same, what will be the value of the money multiplier? The value of the money supply?

g. If the Fed wishes to have the value of the money supply in the economy at the initial level (part c), how should it respond?

h. How much in government bonds should the Fed sell or buy?

i. If the Fed buys from Chase 10 million in government bonds, given the money multiplier in part f, what would be the change in the money supply?