Suppose that the required reserve ratio is 10 percent and you withdraw $25,000 from Comerica Bank. What is the deposit multiplier? Describe it accurately in detail.What is the total decrease in deposits in the banking system? Explain accurately and in detail.What is the change in the money supply? Accurately explain in detail.

The banks might often decide to hold some finances back and not lend the whole money to the…

Answered: Suppose that the required reserve ratio…

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter25: Money Creation

Section: Chapter Questions

Problem 9SQ

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Suppose that the required reserve ratio is 10 percent and you withdraw $25,000 from Comerica Bank.

What is the deposit multiplier? Describe it accurately in detail.
What is the total decrease in deposits in the banking system? Explain accurately and in detail.
What is the change in the money supply? Accurately explain in detail.

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.

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