suppose that the banking system in Canada has a required reserve ration of 10 pe

Question

suppose that the banking system in Canada has a required reserve ration of 10 percent while the banking system in the United States has suppose that the banking system in Canada has a required reserve ration of 10 percent while the banking system in the United States has suppose that the banking system in Canada has a required reserve ration of 10 percent while the banking system in the United States has Profit and liquidity. b. Profit and loss. c. Deposits and withdrawals d. Assets and liabilities. 6. Suppose that the banking system in Canada has a required reserve ratio of 10 percent while the banking system irn the United States has a required reserve ratio of 20 per- cent. In which country would $100 of initial excess re- serves be able to cause a larger total amount of money creation? LO33.4 a. Canada. b. United States. 7. Suppose that the Fed has set the reserve ratio at 10 percent and that banks collectively have $2 billion in excess reserves. What is the maximum amount of new checkable-deposit money that can be created by the banking system? LO33.5 a. $O. b. $200 million. c. $2 billion. d. $20 billion. 8. Suppose that last year $30 billion in new loans were extended by banks while $50 billion in old loans were paid off by borrowers. What happened to the money supply? LO33.5 a. Increased. b. Decreased. c. Stayed the same. 3. Third National Bank has reserves of $20,000 and checkable deposits of S100,000. The reserve ratio is 20 percent.

Explanation / Answer

Ans

1 Canada because it has less reserve ratio and deposit multiplier =1/RR

2 money multiplier=1/10%=10. So=money multiplier (excess reserves) =2(10)=20 billion

3 decreased because 50-30=20 billion are now excess reserves rather than being part of money supply

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