Suppose you inherited $257,000 cash from a bequest, and you decide to deposit it at your bank. Assuming the $257,000 is the only money supply in the economy, your task is to determine how much money your bank can create using the $257,000 you deposited. Show all your calculations The required reserve ratio is 3.5%. a. How much of the initial money supply can the bank give out as loans? If the recipient of the loan keeps the money at the same bank, what will be the total money supply in the economy? b. How much of the new money supply can the bank give out as loans? Will it increase or decrease the total money in the economy? By how much? c. Suppose the required reserve ratio increases by 4.5%, repeat steps in parts (a) and (b). What is the total money supply in the economy? Thank you so much!!
Suppose you inherited $257,000 cash from a bequest, and you decide to deposit it at your bank. Assuming the $257,000 is the only money supply in the economy, your task is to determine how much money your bank can create using the $257,000 you deposited. Show all your calculations
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a. How much of the initial money supply can the bank give out as loans? If the recipient of the loan keeps the money at the same bank, what will be the total money supply in the economy?
b. How much of the new money supply can the bank give out as loans? Will it increase or decrease the total money in the economy? By how much?
c. Suppose the required reserve ratio increases by 4.5%, repeat steps in parts (a) and (b). What is the total money supply in the economy?
Thank you so much!!
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