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dmitriy555 [2]
3 years ago
12

Assume that the banking system has total reserves of $100 billion. Assume also that required reserves are 10 percent of checking

deposits, and that banks hold no excess reserves and households hold no currency. a. What is the money multiplier? What is the money supply? b. If the Fed now raises required reserves to 20 percent of deposits, what is the change in reserves and the change in the money supply?
Business
2 answers:
Georgia [21]3 years ago
7 0

Answer:

a) multiplier 10

b) money supply 1,000B

c) if the FED raises to 20% the minimum reverse ratio:

  mutiplier 5

  money suply 500B

Explanation:

a) the multiplier is 1 over the required reserve ratio as it assumes banks will lend all the cash above this threshold

1/0.1 = 10

b) money supply: reserve times mutiplier:

100 x 100 = 1,000 billions

c) if required reserve ratio incerase to 20% then:

multiplier 1/0.2 = 5

and money supply 100 x 5 = 500 billions

MrRissso [65]3 years ago
5 0
The money multiplier is the amount of money that is generated from the reserves of a bank:
$100/0.10 - $100 = $900 billion
The money supply is
$100/0.10 = $1000 billion of $1 trillion
If the reserves is changed to 20%, the money multiplier and money supply will decrease
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Karin's company therefore would need to demonstrate that the obligation can be refinanced on a long-term basis by them and they must also have the intention to do so as well.

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3 years ago
Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment). The company prepares a
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Answer:

d. Debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200

Explanation:

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We need to adjust the allowance to our estimated uncollectible account. Currently, it has 2,300 debit balance. We need to increase it to 31,900

If we think it in two steps:

We need to credit by 2,300 to have zero balance,

and then 31,900 to reach the expected uncollectible amount

in total a credit for 34,200 needs to be done

<u>The adjusting entry will be:</u>

bad debt expense                       34,200 debit

allowance for doubtful accounts                        34,200 credit

8 0
3 years ago
Mettel Products sells 100,000 flash drives annually to industrial distributors who resell the drives to business customers for $
Cerrena [4.2K]

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Mettel Products sells 100,000 flash drives annually to industrial distributors who resell the drives to business customers for $40 each. The distributors’ margins are 25%. Mettel Products’ cost of goods sold is $10.00 each. Mettel’s total variable costs (including selling costs) are $15.00 per drive.

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7 0
3 years ago
Barnes Corporation purchased 75 percent of Nobles’ common stock for $262,500, which was acquired at book value. The fair value
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Solution:

Barnes Corporation purchased 75 percent of Nobles’ common stock

During the year, Nobles reports net income of $40,000.

Hence, 75% of net income of Nobbles is attributable to Barnes Corporation.

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3 0
3 years ago
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Vadim26 [7]

Answer:

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5 0
3 years ago
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