Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve requirement is 5%. How much maximum of new money will be created (maximum amount of new checking deposits created by the banking system) as a result of your bank deposit? Hint: do not count your initial deposit as part of increase. Number $70000 Incorrect. The bank can only loan out excess reserves. Calculate the excess reserves after the lottery winnings were deposited, than multiple that number by the money multiplier. Which events could cause the increase in the money supply to be less than its potential? Check all that apply. Some loan recipients choose to hold some cash instead of depositing all of it in banks. All money loaned out is deposited back into the banking system. Banks decide to keep some excess reserves on hand. Banks choose to loan out all excess reserves

Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve requirement is 5%. How much maximum of new money will be created (maximum amount of new checking deposits created by the banking system) as a result of your bank deposit? Hint: do not count your initial deposit as part of increase. Number $70000 Incorrect. The bank can only loan out excess reserves. Calculate the excess reserves after the lottery winnings were deposited, than multiple that number by the money multiplier. Which events could cause the increase in the money supply to be less than its potential? Check all that apply. Some loan recipients choose to hold some cash instead of depositing all of it in banks. All money loaned out is deposited back into the banking system. Banks decide to keep some excess reserves on hand. Banks choose to loan out all excess reserves

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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