Assume that the required reserve ratio is 5 percent. If a commercial bank has $2 million cash in its vault, $1 million in govern
1 answer:
Answer:
The correct answer is option B.
Explanation:
The required reserve ratio is 5 percent.
A commercial bank has $2 million cash in its vault, $1 million in government securities, $3 million on deposit at the Fed, and $60 million in checkable deposits.
The required reserves
=
=
= 3 million
The total reserves are the amount in the vault and the deposits at the fed. So, the total reserves are $5 million.
The excess reserves are
= $5 million - $3 million
= $2 million
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Answer:
The incomplete part of the question is "Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of $1 million per year. If the permits are not tradable, what will be the cost of eliminating half of the pollution? If permits cannot be traded, then the cost of the pollution reduction will be $1 million per year." The full question is attched as picture as well
1) Tradable permit system
Then lower MAC firm will abate the all pollution units
Then as MAC1 = $250, MAC2 = $275
Firm 1 = Consolidated electric
Firm 2 = Commonwealth utility
Then 1 will sell all permits to 2, at a price between $250 & $275.
So total cost of abatement of 20 units = MAC1 * 20
= $250 * 20 Unit
= $5,000
2) Non-tradable permits
Total cost = MC1*10 + MC2*10
= $2,500 + $2,750
= $5,250
