Assume the banking system has $200 billion in demand deposits and $80 billion in reserves. In addition, assume that the required reserve ratio is 25%. Answer the following questionsa. a)How much excess reserves are in this system?b)What is the value of the money multiplier?c)How much of money supply will be created if the banking system lent out all of its excess reserves?

a. Required reserves = $200 * 0.25 = $50 billion Actual reserves = $80 billion Excess reserves =…

Answered: Assume the banking system has $200…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter12: Money, Banking And The Financial System

Section: Chapter Questions

Problem 4WNG

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Assume the banking system has $200 billion in demand deposits and $80 billion in reserves. In addition, assume that the required reserve ratio is 25%. Answer the following questionsa.

a)How much excess reserves are in this system?

b)What is the value of the money multiplier?

c)How much of money supply will be created if the banking system lent out all of its excess reserves?

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