Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Question

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Answer 1

Question

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.

Chapter 13, Problem 1VQP

To determine

Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Expert Solution & Answer

Explanation of Solution

The required reserve ratio or cash reserve ratio is inversely related to the money supply. The certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction is known as cash reserve ratio. When the economy’s money supply is lower, the central bank advices the commercial bank to maintain a higher the cash reserve ratio.

The simple deposit multiplier is positively related to money supply. The simple deposit multiplier is the reciprocal of cash reserve ratio. Commercial banks hold certain fraction of deposit and lend the remaining amount for loan purpose, it is known as simple deposit multiplier. When the economy’s money supply is higher, simple deposit multiplier increases.

Economics Concept Introduction

Required reserve ratio: Required reserve ratio refers the certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction.

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Answer 2

Question

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.

Chapter 13, Problem 1VQP

To determine

Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Expert Solution & Answer

Explanation of Solution

The required reserve ratio or cash reserve ratio is inversely related to the money supply. The certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction is known as cash reserve ratio. When the economy’s money supply is lower, the central bank advices the commercial bank to maintain a higher the cash reserve ratio.

The simple deposit multiplier is positively related to money supply. The simple deposit multiplier is the reciprocal of cash reserve ratio. Commercial banks hold certain fraction of deposit and lend the remaining amount for loan purpose, it is known as simple deposit multiplier. When the economy’s money supply is higher, simple deposit multiplier increases.

Economics Concept Introduction

Required reserve ratio: Required reserve ratio refers the certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction.

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Answer 3

Question

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.

Chapter 13, Problem 1VQP

To determine

Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Expert Solution & Answer

Explanation of Solution

The required reserve ratio or cash reserve ratio is inversely related to the money supply. The certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction is known as cash reserve ratio. When the economy’s money supply is lower, the central bank advices the commercial bank to maintain a higher the cash reserve ratio.

The simple deposit multiplier is positively related to money supply. The simple deposit multiplier is the reciprocal of cash reserve ratio. Commercial banks hold certain fraction of deposit and lend the remaining amount for loan purpose, it is known as simple deposit multiplier. When the economy’s money supply is higher, simple deposit multiplier increases.

Economics Concept Introduction

Required reserve ratio: Required reserve ratio refers the certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction.

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Answer 4

Question

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.

Chapter 13, Problem 1VQP

To determine

Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Expert Solution & Answer

Explanation of Solution

The required reserve ratio or cash reserve ratio is inversely related to the money supply. The certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction is known as cash reserve ratio. When the economy’s money supply is lower, the central bank advices the commercial bank to maintain a higher the cash reserve ratio.

The simple deposit multiplier is positively related to money supply. The simple deposit multiplier is the reciprocal of cash reserve ratio. Commercial banks hold certain fraction of deposit and lend the remaining amount for loan purpose, it is known as simple deposit multiplier. When the economy’s money supply is higher, simple deposit multiplier increases.

Economics Concept Introduction

Required reserve ratio: Required reserve ratio refers the certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction.

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Answer 5

Chapter 13, Problem 1VQP

To determine

Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Expert Solution & Answer

Explanation of Solution

The required reserve ratio or cash reserve ratio is inversely related to the money supply. The certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction is known as cash reserve ratio. When the economy’s money supply is lower, the central bank advices the commercial bank to maintain a higher the cash reserve ratio.

The simple deposit multiplier is positively related to money supply. The simple deposit multiplier is the reciprocal of cash reserve ratio. Commercial banks hold certain fraction of deposit and lend the remaining amount for loan purpose, it is known as simple deposit multiplier. When the economy’s money supply is higher, simple deposit multiplier increases.

Economics Concept Introduction

Required reserve ratio: Required reserve ratio refers the certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction.

Answer 6

Chapter 13, Problem 1VQP

To determine

Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Expert Solution & Answer

Explanation of Solution

The required reserve ratio or cash reserve ratio is inversely related to the money supply. The certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction is known as cash reserve ratio. When the economy’s money supply is lower, the central bank advices the commercial bank to maintain a higher the cash reserve ratio.

The simple deposit multiplier is positively related to money supply. The simple deposit multiplier is the reciprocal of cash reserve ratio. Commercial banks hold certain fraction of deposit and lend the remaining amount for loan purpose, it is known as simple deposit multiplier. When the economy’s money supply is higher, simple deposit multiplier increases.

Economics Concept Introduction

Required reserve ratio: Required reserve ratio refers the certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction.

Answer 7

Chapter 13, Problem 1VQP

To determine

Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Answer 8

Expert Solution & Answer

Explanation of Solution

The required reserve ratio or cash reserve ratio is inversely related to the money supply. The certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction is known as cash reserve ratio. When the economy’s money supply is lower, the central bank advices the commercial bank to maintain a higher the cash reserve ratio.

The simple deposit multiplier is positively related to money supply. The simple deposit multiplier is the reciprocal of cash reserve ratio. Commercial banks hold certain fraction of deposit and lend the remaining amount for loan purpose, it is known as simple deposit multiplier. When the economy’s money supply is higher, simple deposit multiplier increases.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Required reserve ratio: Required reserve ratio refers the certain percentage of deposit that the commercial banks are essentially required to keep as in the form of cash according to the central bank direction.

Answer 12

Ch. 13.1 - Prob. 1ST Ch. 13.1 - Prob. 2ST Ch. 13.1 - Prob. 3ST Ch. 13.3 - Prob. 1ST Ch. 13.3 - Prob. 2ST Ch. 13.3 - Prob. 3ST Ch. 13.3 - Prob. 4ST Ch. 13 - Prob. 1VQP Ch. 13 - Prob. 2VQP Ch. 13 - Prob. 3VQP

Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Relationship between required reserve ratio and the money supply, and simple deposit multiplier and the money supply.

Explanation of Solution

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