Suppose the MB is $100 bilion, deaired reserves are 10% and the curreney-deposit ratio is10% (anks hold no exces reerves in this example). a) What is the money supply?O n00 bilonO $1000 bilion5500 bionnone on the atove

Given reserve ratio = 10 % Currency deposit ratio = 10 % Monetary base = 100 Billion $

Answered: Suppose the MB ls $100 bilion, desired…

Suppose the MB ls $100 bilion, desired reserves are 10% and the currency-deposit ratio 10% (arks hold no excess reerves in this eample). a) What is the money supply?

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter29: The Monetary System

Section: Chapter Questions

Problem 3QCMC

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

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Suppose the MB is $100 bilion, deaired reserves are 10% and the curreney-deposit ratio is
10% (anks hold no exces reerves in this example). a) What is the money supply?
O n00 bilon
O $1000 bilion
5500 bion
none on the atove

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