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3 years ago

5. Use the information below to answer question 5:

Business

2 answers:

ipn [44]3 years ago

8 0

Answer:

a. 200

b.900

c. 10

Explanation:

a) Excess reserves = total reserves – required reserves

= 400 (given) – (deposits* required reserve ratio of which is usually 10%, so we assume it is 10%)

= 400 – (2000* 10%)

= 400-200

Excess reserves = $200

b) Monetary base = total reserves + currency

= 400 + 500 (given)

Monetary Base (B) = $900

c) The money multiplier is calculated as 1 divided by the required reserve ratio

Money multiplier = 1 / 10%

= 10

NemiM [27]3 years ago

5 0

Answer:

(a) Excess reserves = 200

(b) Monetary base (B) = 900

Explanation:

Assuming that the required reserve ratio (missing in the question) is 0.1:

(a) Excess reserves = Reserves - Required reserves

Reserves = 400

Required reserves = Deposits x Required reserve ratio

= 2000 x 0.1

= 200

Hence, Excess reserves = 400 - 200

= 200

(b) Monetary base (B) = Reserves + Currency

= 400 + 500

= 900

= 1 / 0.1

= 10

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Job306 Job307 job308

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