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anastassius [24]
3 years ago
12

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amo

unt to $5 billion. What is the level of deposits?
Business
1 answer:
Rudik [331]3 years ago
8 0

Answer:

Total Deposits  = $4937.5 billion  

Explanation:

given data

currently in reserves = $400 billion

reserve requirement = 8 percent

reserves amount = $5 billion

solution

first we get  here Minimum Required Reserves that is express as

Minimum Required Reserves = Current Reserves - Excess Reserves    .........................1

put here value we get

Minimum Required Reserves = $400 billion - $5 billion

Minimum Required Reserves = $395 billion

and

Total Deposits is express as

Total Deposits  = \frac{minimum\ required\ reserve}{reserve\ required}      ......................2

Total Deposits  = \frac{395}{0.08}

Total Deposits  = $4937.5 billion  

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Answer:

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PV(of inflows - of outflows) = 0

((125.4p - 403400)*0.79 + 33670)* 3.8887 - 962000 = 0

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