can anyone answer and if possible explain why choose the answer. e.g. 1) D becau

Question

can anyone answer and if possible explain why choose the answer.

e.g. 1) D because.........

Refer to the information provided in Scenario 25.1 below to answer the question(s) that follow. SCENARIO 25.1: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up Bank No. 1 Bank No. 2 Bank No. 3 Bank No. 4 New Deposit $100,000.00 $95,000.00 $90,250.00 $85, 737.50 Required Reserve $5,000.00 $4,750.00 $4,512.50 $4,286.87 Loans $95,000.00 $90,250.x0 $85,737.50 $81,450.63 eserve ratio? A) 4% B) 5% C) 8% D) 10% 34. Refer to Scenario 25.1. What is the money multiplier in this economy? A) 10 B) 16.67 C) 20 D) 50 35. Refer to Scenario 25.1. Based on the initial $100,000 deposit, the money supply will, at most, expand to A) $1 million. B) $2 million. C) $16.67 million. D) $50 million. 36. Refer to Scenario 25.1. the required reserve ratio were changed to 10%, total loans of Bank If Bank No. 2 will change to A) 77,400. B) 81,000. C) 85,000. D) 90,000.

Explanation / Answer

33) Option B is correct (Required reserve ratio = required reserves/deposits)

34) Option C is correct (Money multiplier = 1/required reserve ratio)

35) Option B is correct (Money supply expansion = Initial deposit/required reserve ratio)

36) Deposit in Bank 2 = Excess reserves of Bank 1 = 100000 x (1 - 0.1) = $90000

Loans of Bank 2 = Deposit in Bank 2 - required reserve = 90000 - 90000 x 0.1 = 81000

Option B is correct

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