A new deposit of $3,000 is made in the banking system with the reserve-deposit ratio r = 15% and the cash drain (cash-deposit ratio) c = 8%. a. What is the total amount of the deposits the banking system will create from this new deposit? Show your work. b. If the illegal and underground economy in the country increased, what would happen to the banking system’s ability to create money (hint: people would want to keep more cash to make.
A new deposit of $3,000 is made in the banking system with the reserve-deposit ratio r = 15% and the cash drain (cash-deposit ratio) c = 8%. a. What is the total amount of the deposits the banking system will create from this new deposit? Show your work. b. If the illegal and underground economy in the country increased, what would happen to the banking system’s ability to create money (hint: people would want to keep more cash to make.
Chapter13: The Federal Reserve System
Section: Chapter Questions
Problem 8WNG
Related questions
Question
A new deposit of $3,000 is made in the banking system with the reserve-deposit ratio r = 15% and the cash drain (cash-deposit ratio) c = 8%.
a. What is the total amount of the deposits the banking system will create from this new deposit? Show your work.
b. If the illegal and underground economy in the country increased, what would happen to the banking system’s ability to create money (hint: people would want to keep more cash to make.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
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.Recommended textbooks for you
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc