Answered: Suppose Joe changes his $1,000 demand…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter13: The Federal Reserve System

Section: Chapter Questions

Problem 9WNG

See similar textbooks

Related questions

Question

Suppose Joe changes his $1,000 demand deposit from Bank A to Bank B. If the reserve requirement is 10 percent, what is the potential change in demand deposits as a result of Joe's action?

Expert Solution

Step 1

$S u p p o s e t h e i n i t i a l d e m a n d d e p o s i t i s % 10, 000 N o w, i f J o e w i t h d r a w $ 10, 000 f r o m B a n k A T h u s, c h a n g e i n t h e d e m a n d d e p o s i t w i l l b e : $ 10, 000 - $ 1, 000 = $ 9, 000 N o w, i f J o e d e p o s i t $ 1, 000 t o B a n k B T h u s, t h e n e w d e m a n d d e p o s i t w i l l b e : $ 9, 000 + $ 1, 000 = $ 10, 000 T h e r e f o r e, t h e r e i s n o p o t e n t i a l c h a g e i n d e m a n d d e p o s i t s a s a r e s u l t o f j o e' s a c t i o n .$

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions