Peter Kotrodimos puts $100 into his checking account. The reserve requirement for the bank is .20. After this transaction, demand deposits increased by _____, and the maximum the money supply would increase with this transaction would be _____. $100; $400 $100; $600 $100; $500 $0; $400
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- Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: a) the money supply by the whole banking system can increase by $1,000. b) the money supply by the whole banking system can increase by $4,000. c) the money supply by the whole banking system can increase by $8,000.A deposit of $100 was made to the bank as we know the money supply won't increase until the bank loans the $100. If the required reserve ratio is 6%, how much will the money supply ultimately increase once this new deposit has gone all the way through the system? What is the money multiplier in this case?During the financial crisis, banks excess reserves [beyond what is required by regulatory reserve requirements] exploded. If the Federal Reserve Bank of New York purchased $1 billion in U.S. Treasury Bills in this environment and the reserve requirement is 20%, then the change in the total money supply will be approximately: Group of answer choices an increase of a bit more than $1 billion. a decrease of a bit more than $1 billion. an increase of a bit less than $5 billion. a decrease of a bit less than $5 billion
- If deposits in the banking system are $540, while the reserve ratio is 0.2 and the currency to deposit ratio is 0.9, then a) calculate the total demand for high powered money. b) calculate the money multiplierSuppose you found Rs. 2000 that was stored under your grandmother's mattress and you decided to deposit this money in a Bank of India. If the desired reserve ratio were 20 percent and all excess reserves were lent out. a) Calculate the money supply created by this deposition in the economy?b) Following a new deposit of Rs. 2000, what is the reserve requirement of the commercial bank?c) Suppose all the banks in the banking system collectively have Rs.20 million in cash reserves and have a desired reserve ratio of 20 percent, the maximum amount of demand deposits the banking system can support is?You take $300 you had kept under your mattress and deposit it in your bank account. Suppose this $300 stays in the banking system as reserves and banks hold reserves equal to 15 percent of deposits. The total amount of deposits in the banking system increases by $ supply increases by $. and the money
- Suppose again that checkable deposits started off at $400,000 in First Main Street Bank, the required reserve ratio is 15%, and no excess reserves and no cash leakage exist. You know from the previous step that, due to the sale of securities by the Fed, the money supply in the economy contracted from $400,000 to $392,000. But the contraction of the money supply does not stop with First Main Street Bank. It moves to other banks. The loan repayment that Charles made to First Main Street Bank was written on a check Second Republic Bank issued. Then, when the check cleared, the reserves of Second Republic Bank declined, and Second Republic Bank found itself reserve deficient as well. It applied loan repayments to its reserve deficiency position. The effect continued with other banks and so on. The initial removal of funds in the amount of $8,000 will cause the money supply to contract by $______. Therefore, the money supply is $______. (Hint: round the results of your calculations to the…Suppose a month ago, total deposit collected by the banking system was 100 billion and total required reserve of the banking system was 10 billion. Now deposit has increased to 150 billion and total required reserve is 15 billion. Determine the maximum change in money supply.Most people in the country of Classica tend to keep $3 out of every $100 of their cash holdings in their wallets. The central bank has instructed the commercial banks to also hold 4% of all bank deposits as reserves. Suppose that in 2018 customers deposit $4,000 into their bank accounts. Based on the extended money multiplier calculated in part (i), what is the calculation of the total amount which the money supply in the banking system will eventually increase to?
- Assets Vault Cash Deposits at Fed Loans Total $50,000 $200,000 $600,000 $850,000 Liabilities and Net Worth First Southern's bank reserves are equal to $ checking deposits, First Southern' would maintain $ reserves over and above the desired amount. Deposits $850,000 Total The increase in the money supply will be $850,000 If First Southern bank wanted to maintain 0.10 of its assets as reserves against as reserves. Therefore, it would have $ as additional If First Southern uses the reserves above the desired level to extend additional loans, the money supply would increase by S If First Southern wanted to maintain 0.05 of its assets as reserves against checking deposits, First Southern' would maintain S as reserves, additional reserves would be $ and the increase in the money supply would be $ if First Southern chooses a desired reserve ratio of 0.05.If the required reserve ratio is 12.5%, and Elon Musk has deposited $5 billion cash to his bank account. What happens to the money supply in the economy? A) nothing happens in money supply since both cash and bank deposits are money anyway. B) Money supply increases by $50 billion. C) Money supply increases by $40 billion. D) Money supply increases by $35 billion.Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve requirement is 5%. How much maximum of new money will be created (maximum amount of new checking deposits created by the banking system) as a result of your bank deposit? Hint: do not count your initial deposit as part of increase. Number $70000 ☐ ☐ Incorrect. The bank can only loan out excess reserves. Calculate the excess reserves after the lottery winnings were deposited, than multiple that number by the money multiplier. Which events could cause the increase in the money supply to be less than its potential? Check all that apply. Some loan recipients choose to hold some cash instead of depositing all of it in banks. All money loaned out is deposited back into the banking system. Banks decide to keep some excess reserves on hand. Banks choose to loan out all excess reserves.