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Compute the Excess reserve, multiplier also quantity of money

1. Suppose which the T-account for Nan Bank Inc. is as follows:
Assets Liabilities
Reserves $100,000 Deposits $500,000
Loans $400,000

(i) If the Bank of Canada requires banks to hold 5 percent of deposits as reserves, describe how much in excess reserves does Nan Bank Inc. now hold?

(ii) Suppose which all other banks hold only the required amount of reserves. If Nan Bank Inc. decides to reduce its reserves to only the required amount, by describe how much the economy's money supply increase would?

2. The economy of Kyle land contains 2000 $1 bills.

1. If people hold all money as currency, illustrate what is the quantity of money?

2. If people hold all money as demand deposits also the banks maintain 100 percent reserves, Illustrate what is the quantity of money?

3. If people hold equal amounts of currency also demand deposits also the banks maintain 100 percent reserves, Illustrate what is the quantity of money?

4. If people hold all money as demand deposits also the banks maintain a reserve ratio of 10 percent, Illustrate what is the quantity of money?

5. If people hold equal amounts of currency also demand deposits also the banks maintain a reserve ratio of 10 percent, Illustrate what is the quantity of money?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M916479

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