1. Suppose that the reserve requirement for chequing deposits is 15 % and the banks donot hold any excess reserves. What is the effect on the economy’s reserves and themoney multiplier if the central bank sells $2 million of government bonds? 2. Now suppose the central bank lowers the reserves requirement to 5%, but the Savers’banks choose to hold another 5% deposits as excess reserves. State two reasons whythe Savers’ bank want to hold excess reserves 3. Analyse briefly the impact of the overall change in the money multiplier and the moneysupply as a result of the policies implemented by the Savers’ bank.
1. Suppose that the reserve requirement for chequing deposits is 15 % and the banks donot hold any excess reserves. What is the effect on the economy’s reserves and themoney multiplier if the central bank sells $2 million of government bonds? 2. Now suppose the central bank lowers the reserves requirement to 5%, but the Savers’banks choose to hold another 5% deposits as excess reserves. State two reasons whythe Savers’ bank want to hold excess reserves 3. Analyse briefly the impact of the overall change in the money multiplier and the moneysupply as a result of the policies implemented by the Savers’ bank.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
1. Suppose that the reserve requirement for chequing deposits is 15 % and the banks do
not hold any
money multiplier if the central bank sells $2 million of government bonds?
2. Now suppose the central bank lowers the reserves requirement to 5%, but the Savers’
banks choose to hold another 5% deposits as excess reserves. State two reasons why
the Savers’ bank want to hold excess reserves
3. Analyse briefly the impact of the overall change in the money multiplier and the money
supply as a result of the policies implemented by the Savers’ bank.
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