Chapter 16:Reserves = $1,500First national bankLoaned = $8,500Chapter 17:Deposits = $10,000Money Created = Amount x MM1. If the bank has to maintain a required reeserve ratio of 10% then what is the excess reserve if any?1/P2. If the reserve ratio is 10% then what will be money multiplier3. How much extra money the bank will be able to create with an addtionalMS3/4#1/20Total Reserve = Required Reserve + Excess ReserveMoney Multiplier = 1/RWhere R is Reserve RatioMD1. What is the price level at the equilibirum?2. What is the value of money at the equilibirum?3. If the velocity is 4, money supply is 100, price level is 10 then whatwill be the output?MXV=PXYP= Price levelValue of Money = 1/P

Reserves are the part of deposits that is kept out from the deposits by the bank. Excess reserve =…

Reserves = First national bank $1,500 Loaned = $8,500 Deposits $10,000 Total Reserve = Required Reserve + Excess Reserve Money Multiplier = 1/R Where R is Reserve Ratio Money Created = Amount x MM 1. If the bank has to maintain a required reeserve ratio of 10% then what is the excess reserve if any? 2. If the reserve ratio is 10% then what will be money multiplier 3. How much extra money the bank will be able to create with an addtional

Reserves = First national bank $1,500 Loaned = $8,500 Deposits $10,000 Total Reserve = Required Reserve + Excess Reserve Money Multiplier = 1/R Where R is Reserve Ratio Money Created = Amount x MM 1. If the bank has to maintain a required reeserve ratio of 10% then what is the excess reserve if any? 2. If the reserve ratio is 10% then what will be money multiplier 3. How much extra money the bank will be able to create with an addtional

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.3P

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John deposits $1,800 into his checking account. If the reserve ratio is 10%, what are the required and excess reserves? Required reserves: $[ Excess reserve erves: $
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Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 750,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Kate, who immediately uses the funds to write a check to Hubert. Hubert deposits the funds immediately into his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Shen, who writes a check to Poornima, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Valerie in turn. Fill in the following table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar. Increase in Deposits Increase in Required Reserves…
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