Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 28, Problem 2TY
To determine
The effect of an increase in deposit worth of 12 billion on money supply with a reserve ratio of $25.
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What entity decides what the reserve requirement is? 
When Christine deposits $1,000 in Bank A, and there is a reserve requirement ratio of 10%, how much can Bank A lend out?
What is the reserve requirement
Chapter 28 Solutions
Economics: Principles & Policy
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- Explain why keeping a reserve ratio of zero could be a very bad ideaarrow_forwardJane deposits $175 into her bank, and the reserve requirement is 15 percent. How much is the excess reserve in dollarsarrow_forwardIf you deposit a $300 check in your account and the required reserve ratio is 10 percent then the banks answer D,E and Farrow_forward
- You deposit a $1,000 scholarship check in the bank. If the required reserve ratio is 10 percent, explain how the banking system will create new money and how much money can potentially be created.arrow_forwardWhat three factors can affect the size of the reserve-to-deposit ratio?arrow_forwardJohn deposits $1,600 into his checking account. If the reserve ratio is 5%, what are the required and excess reserves? Required reserves: $ Excess reserves: $arrow_forward
- 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 %24arrow_forwardIf a bank has total reserves of $200,000 and $1 million in deposits, how much money can it lend if the required reserve ratio is (a) 4 percent? (b) 6 percent?arrow_forwardThe 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.arrow_forward
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