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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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On January 2, 2015, Moser, Inc., purchased equipment for $100,000. The equipment was expected to have a $10,000 salvage value at
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Answer:

a. Debit Depreciation expense $6,400

   Credit Accumulated depreciation $6,400

b. $33,600

Explanation:

Depreciation is the systematic allocation of cost to an asset. It is given as

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New depreciation rate

= (40,000 - 8000)/5

= $6,400

To record this for 2019,

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Credit Accumulated depreciation $6,400

The book value of the equipment at the end of 2019

= $40,000 -  $6,400

= $33,600

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