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kow [346]
2 years ago
12

The desired reserve ratio is 10 percent of deposits, and the currency drain ratio is 1 percent of deposits.

Business
1 answer:
Flauer [41]2 years ago
4 0

Answer:

Quantity of money changes by $50,000,000

Explanation:

Desired reserve ratio = 10% = 0.1

Currency drain ratio = 1% = 0.01

Money multiplier = (1+0.1) / (0.1+0.01) = 1.1/ 0.11 = 10

Value of securities purchased = $5 million

Change in quantity of money :

$5 million * 10 = $50 million

Currency created : currency drain ratio * change in quantity of money

0.01 * $50,000,000 = $500,000

Amount of bank deposit = quantity change - currency created

= $50,000,000 - $500,000 = $4,500,000

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8 0
3 years ago
14. Suppose that the production of $1 million worth of steel in Canada requires $100,000 worth of taconite. Canada’s nominal tar
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Answer:

The effective rate of protection for Canada’s steel industry is 21%

Explanation:

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2 years ago
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