MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 13, Problem 1TY
To determine
To Describe: The quantum of money supply for the reserve ratio.
Expert Solution & Answer
Answer to Problem 1TY
The size of money supply for reserve ratio of
Explanation of Solution
The bank has
By using the following formula, the size of money can be calculated:
Where RR is the required reserves held by bank.
For
Therefore, the size of money supply for reserve ratio of
Similarly, for
Therefore, the size of money supply for reserve ratio of
Similarly, for
Therefore, the size of money supply for reserve ratio of
Economics Concept Introduction
Introduction: Reserves are assets held with bank in order to cater the requirements of transactions done daily, which includes fund withdrawals, fund transfers between banks, to clear collection checks etc.
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Students have asked these similar questions
suppose that you deposit 8000 in your bank and the required reserve ration is 15 percent the maximum loan your bank can make as a direct result of your deposit is
The manager of the bank where you work tells you that your bank has $10 million in excess reserves. She also tells you that the bank has $500 million in deposits and $455 million in loans. Given this information you find that the reserve requirement must be
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a) Suppose that Tk.10,000 in new taka bills (never seen before) falls magically from the sky into your hands. What are the minimum increase and the maximum increase in the money supply that may result? Assume the required reserve ratio is 10 percent.b) Suppose you receive Tk. 10,000 from your grandmother and deposits the money in a saving account. your grandmother gave you the money by writing a check on her saving account. Would the maximum increase in the money supply still be what you found it to be in part a) where you received the money from the sky? Why or why not?c) Suppose that instead you getting Tk. 10,000 from the sky or a check through your grandmother, you get the money from your mother who had buried it in a can in her backyard. In this case, would the maximum increase in the money supply be what you found it to be in part a)? Why or why not?
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