1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
AlexFokin [52]
3 years ago
10

Consider the following information about a banking system: new currency deposited in the system = $40 billion, legal reserve rat

io = 0.20, excess reserves prior to the currency deposit = $0. The $40 billion deposit of currency into checking accounts will create excess reserves of
Business
1 answer:
Vlada [557]3 years ago
3 0

Answer:

The bank will create excess reserve of $200 billion

Explanation:

The question measures the size of credit expansion associated with the new currency deposit. the computation below shows how excess reserves can be computed.

Money multiplier              =   1 /Legal Reserve Ratio  = 1/0.2 = 5

Excess Reserve Created = A x (1 /Legal Reserve Ratio)

Where:                          A  = New currency deposit =  $40

       Legal Reserve Ratio = 0.20      

                                     

Excess Reserve Created = $40 x (1/0.2)  =  $40 x 5 =  $200 billion                                          

The legal reserve of 5 indicates that for every unit of money reserved by banks, they are able to create 5 units of same.

The money creation capability of the banking system as a whole is depends on the legal reserve ratio. Legal reserve ratio is a fraction of a bank deposit which the law requires them to hold. The bank can only lend the balance after deducting the legal reserve.

You might be interested in
Which of the following best describes the purpose of making an investment
LUCKY_DIMON [66]

Answer:

b.) to use money to make more money

Explanation:

<em>The correct reason for making investments would be </em><em>to use money to make more more money.</em>

<u>A financial investment represents the act of allocating money to a process or an item in order to reap profit or generate income in the short term, the long term, or both. </u>

An investment can be in the form of purchased goods or services that can later be sold at a higher amount. It can also be an item or service that will be yielding immediate income while preserving all or parts of its original value.

The money made on an investment is referred to as gains o returns.

<em>The correct option is </em><em>b</em><em>.</em>

3 0
3 years ago
An example of a possible marketing problem due to political relations between countries is American firms may be disliked in par
lianna [129]

Explanation:

popular vangkee

maaf ya vengkeee

6 0
3 years ago
Matching is:
kvasek [131]

Answer:

2. A result of recognizing revenues and expenses that arise from the same transaction.

Explanation:

Matching is a concept in accounting which favors the accrual accounting over cash basis of accounting.

It is a concept in which the cost incurred during the course of carrying out some activities that generate revenue is match to the revenue generated.

Hence Matching is a result of recognizing revenues and expenses that arise from the same transaction.

3 0
3 years ago
Jordan visited a sporting goods shop. The salesperson knew that he had a fear of bugs and used this fear to sell him extra campi
stepladder [879]

Answer:

Deceptive sales technique

Explanation:

Based on the information provided within the question it can be said that what the salesperson did in this scenario is an example of a Deceptive sales technique. This term refers to when a salesperson pushes a product or service on a customer with high-pressure by appealing to that individuals potential fears, greed, or vanity in order to convince them on purchasing the product. Exactly what the salesperson did to Jordan.

7 0
3 years ago
Read 2 more answers
The factors of production attempt to instill the idea that resources are
Flauer [41]

Answer: inputs

Explanation: they are required for processing and necessary for the output product

5 0
4 years ago
Read 2 more answers
Other questions:
  • The strongest argument for an independent Federal Reserve rests on the view that subjecting the Fed to more political pressures
    12·1 answer
  • An innovative change involves ______ complexity, cost, and uncertainty.
    6·1 answer
  • Which of the following best describes the concept of laissez-faire?
    5·1 answer
  • On January 2, Yorkshire Company acquired 40% of the outstanding stock of Fain Company for $600,000. For the year ended December
    8·1 answer
  • Match each term with the correct definition.
    5·1 answer
  • For each of the following accounts indicate the effect of a debit or a credit on the account and the normal balance.
    10·1 answer
  • Marriage between individuals who have similar social characteristics
    14·1 answer
  • On March 14, Teal Co. accepted a 120-day, 6% note in the amount of $10,000 from AZC Co., a customer. On the due date of the note
    7·1 answer
  • Recently, the cable television networks have bombarded viewers with a variety of shows based around teams that come in to redeco
    7·1 answer
  • Which is the purpose of the U.S. treasury department?​
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!