(e) fiever aricUU 8 Suppose a bank has a target reserve ratio of 4 percent. Over
ID: 1113432 • Letter: #
Question
(e) fiever aricUU 8 Suppose a bank has a target reserve ratio of 4 percent. Over the next week, the unexpectedly loses $10 million of its initial deposits of $100 million, Which of th following statements is true? (a) To maximize profits, the bank must have initially been holding S40 million in (b) After the loss in deposits, target reserves are $4 million. (c) After the loss in deposits, the bank has deficient reserves.T00 (d) After the loss in deposits, the bank has excess reserves. (e) To maximize profits, the bank initially had more than $40 million in reserves Assuming a fixed target reserve ratio (v) of 10 percent in a banking system and no cash drain out of the banking system, a banking system that receives $1.00 in new deposits can ultimately create an expansion in deposits of (a) $10.00, which is 1/v times $1.00. (b) 10 cents, which is 10 percent of $1.00. (c) approximately $1.11, which is determined by the formula 1/(1-v) (d) $1.10, which is (1 + v) times $1.00. (e) $0.90, which is (1-v) times $1.00. 19.Explanation / Answer
18) C. initially banks hold 4% which makes 4millions deposit and after withdrawing 10 milliom deposit, banks have deficient reserves.
19) money multiplier=1/r=1/0.1=10
Change in money supply=10
Ans is A
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.