Consider again the same economy with two banks: Bank One and Bank Two. Partial balance sheet information for each is given below:Bank One:$120,000 demand deposits$15,000 total reserves on hand$30,000 equityBank Two:$3000 Deposit in the Fed$10,000 total reserves on hand$8000 US government bonds$80,000 demand depositsIn addition to the above information, members of the public hold $15,000 in cash, and the central bank requires that banks hold 10% of checking as required reserves (as in all class examples).Calculate the "real world" multiplier. Round your answer to three decimal places; do not convert to percent. In other words, if you get 0.999, enter only 0.999 in the blank.

The money multiplier is a peculiarity of making money in the economy as credit creation.

Answered: Consider again the same economy with…

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter15: Money Creation

Section: Chapter Questions

Problem 17SQ

See similar textbooks

Related questions

Question

100%

Consider again the same economy with two banks: Bank One and Bank Two. Partial balance sheet information for each is given below:

Bank One:
- $120,000 demand deposits
- $15,000 total reserves on hand
- $30,000 equity
Bank Two:
- $3000 Deposit in the Fed
- $10,000 total reserves on hand
- $8000 US government bonds
- $80,000 demand deposits

In addition to the above information, members of the public hold $15,000 in cash, and the central bank requires that banks hold 10% of checking as required reserves (as in all class examples).

Calculate the "real world" multiplier. Round your answer to three decimal places; do not convert to percent. In other words, if you get 0.999, enter only 0.999 in the blank.

Definition Definition Capital reserves held by banks or financial institutions over and above the reserves that are required to be maintained by the regulator toward its liabilities and for internal controls. For commercial banks, excess reserve is the amount over the standard reserve as decided by the central bank. These excess reserve funds are available in the form of cash and cash equivalents.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

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.

Recommended textbooks for you

MACROECONOMICS FOR TODAY

Economics

ISBN:

9781337613057

Author:

Tucker

Publisher:

CENGAGE L