The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 20% of the deposits as reserves. What is the money multiplier in this economy?
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The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 20% of the deposits as reserves. What is the money multiplier in this economy?
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- The people in an economy have $20 million in money. Bank hold 1% of the deposits as reserves. What is the money multiplier in this economy?You take $500 that you held as currency and put it into the banking system. The reserve ratio is equal to 20%. Calculate the money multiplier. By how much will increase the total amount of deposits in the banking system? By how much will increase the money supply?You just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 20%, how much will your deposit increase the total value of checkable bank deposits? If the reserve requirement is 8%, how much will your deposit increase the total value of checkable deposits? Increasing the reserve requirement decreases the money supply. %24 %24
- Your friend Sarah borrows money from her bank to buy a car. Explain to her the transactions in which the bank sets up the loan, and why the loan involves an increase in the money supply.The task I am struggling with: Tracy Williams deposits $500 that was in her sock drawer into a checking account at the local bank. The reserve ratio is 10%. a) how dies the deposit initially change the T-account of the local bank? How does it change the money supply? b) If the bank maintains a reserve ratio of 10%, how will it respond to the new deposit? c) if every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan, by how much could the total money supply in the economy expand in response to Tracy´s initial cash deposit of $500? Thank you very much for your help.Why do people demand for money? Discuss the different motives of holding money.
- Find the amount of money that would be created in the banking system because of the money multiplier if the required reserve ratio is 14%, and a bank that had been holding $1,000 as excess reserves decides to loan all this money out.A deposit of $100 was made to the bank as we know the money supply won't increase until the bank loans the $100. If the required reserve ratio is 6%, how much will the money supply ultimately increase once this new deposit has gone all the way through the system? What is the money multiplier in this case?Suppose that your bank's reserve ratio is 0.2 and you deposit $50,000 into the bank. Assume that the bank loans out the maximum amount it can, and people deposit all their money. What is the deposit multiplier? What is the total increase in deposits in the banking system? What is the change in the money supply?
- How is the amount of reserves banks hold related to the amount of money the banking system creates?The First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves? Show your calculations.What amount of additional money supply can a bank system create if the required reserves rate is 10%, and deposits are $5 million?
