Suppose that bob withdraws 100 of cash from his checking, Ask an Expert

Economics

Suppose that Bob withdraws $100 of cash from his checking account at Security Bank and uses it to buy a camera from Jor, who deposits the $100 in his checking account in Serenity Bank. Assuming a reserve ratio of 10 percent and no initial excess reserves, determine the extent to which (a) Security banks must reduce its loans and demand deposits because of the cash withdrawal and (b) Serenity Bank can safely increase its loans as demand deposits because of the cash deposit. Have the cash withdrawal and deposit changed the money supply?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91368092

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