In the hypothetical country of Westlandia, banks are required to hold 20% of checkable deposits as reserves, and the public holds 50% of the loans as currency in circulation and redeposits the remaining 50% percent of the loans.Complete the table (calculations should be to no more than two decimal places).RoundDepositsRequired Reserves of 20%Excess ReservesNew Loans50% of loan proceeds are held as currency in circulation by peopleLoan proceeds redeposited1$500 2 3 4 5 6 7 8 9 10 Totals Calculate the new money supply.Calculate the money multiplier.

The central banks require all the commercial banks to hold some percentage of the deposits with them…

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Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Monetary System

Section: Chapter Questions

Problem 12PA

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In the hypothetical country of Westlandia, banks are required to hold 20% of checkable deposits as reserves, and the public holds 50% of the loans as currency in circulation and redeposits the remaining 50% percent of the loans.

Complete the table (calculations should be to no more than two decimal places).

Round	Deposits	Required Reserves of 20%	Excess Reserves	New Loans	50% of loan proceeds are held as currency in circulation by people	Loan proceeds redeposited
1	$500
2
3
4
5
6
7
8
9
10
Totals

Calculate the new money supply.
Calculate the money multiplier.

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