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blsea [12.9K]
3 years ago
8

Suppose the required reserve ratio is 20 percent, and the Fed buys $1 million worth of bonds from the public. If the public depo

sits this amount into transactions accounts, the money supply will
Business
1 answer:
777dan777 [17]3 years ago
7 0

Answer:

Increase directly by $1 million and an additional lending capacity of $4 million will be created for the banking system.

Explanation:

The formula for increase in money supply is

Increase in money supply = (1 / Required reserve ratio) * Excess reserve.

Now, we have, required reserve ratio of 20%.

That means, out of $1 million deposit, required reserve = ($1,000,000 * 0.20) = $200,000.

Now, we knew that, Total reserve = required reserve + excess reserve

Total Reserve = $1,000,000 and required reserve = $200,000.

So, Excess reserve = $1,000,000 - $200,000 = $800,000.

Now, Increase in money supply = (1 / 0.20) * $800,000 = $4 million.

That means,

If the public deposits this amount into transactions accounts, the money supply will:

Increase directly by $1 million and an additional lending capacity of $4 million will be created for the banking system.

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8 0
3 years ago
Dip N’ Dunk Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the
Leviafan [203]

Answer:

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Explanation:

According to the scenario, computation of the given data are as follows:

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Present value index = Total present value of net cash flow ÷ Amount to be invested  

Present value index Ft. Collins = 607,600 ÷ 620,000  = 0.98

Present value index Boulder = $624,000 ÷ $600,000  = 1.04

Fort Collins has 0.98 present value index and boulder has 1.04 present value index.

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4 0
3 years ago
Firm A issued a $1,000,000 bond with a 20-year term at a discount. If the remaining amount of the discount on bonds payable is $
oksano4ka [1.4K]

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Loss of $200,000

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Jacob has been hinting that he loves to bowl and would like to join the company bowling team in order to get to know his new cow
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It often transpires with questions about job execution. They are face-saving tactics.  Indirect questions are a way of being respectful.  We also practice them when requesting support from friends or when we desire to evade sounding demanding. But, some indirect questions do not exist wh-question words.

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