Download the App!
Get 24/7 study help with the Numerade app for iOS and Android! Enter your email for an invite.
Question
Answered step-by-step
You take $\$$100 you had kept under your mattress and deposit it in your bank account. If this $\$$100 stays in the banking system as reserves and if banks hold reserves equal to 10 percent of deposits, by how much does the total amount of deposits in the banking system increase? By how much does the money supply increase?
Video Answer
Solved by verified expert
This problem has been solved!
Try Numerade free for 7 days
Like
Report
Official textbook answer
Video by Yi Chun Lin
Numerade Educator
This textbook answer is only visible when subscribed! Please subscribe to view the answer
No Related Courses
Chapter 29
The Monetary System
The Data of Macroeconomics
The Real Economy in the Long Run
Money and Prices in the Long Run
Marcelo C.
April 17, 2021
The Fed conducts a $10 million open-market purchase of government bonds. If the required reserve ratio is 10 percent, what are the largest and smallest possible increases in the money supply that could result? Explain.
01:29
You take 100 dollar you ha…
03:22
You take $100$ you had kep…
02:52
03:28
You take $\$ 100$ you had …
02:29
You take Rs. 100 you had k…
02:22
Assume that the banking sy…
01:18
If the Fed buys $\$ 1$ mil…
01:02
If you decide to hold $\$ …
02:53
Analyzing Data The Fed set…
question five. You take $100 you had kept under your mattress and deposited into your bank account. And if this 100 are feels days in the banking system has reserves and it banks hold reserves, they go to 10% off deposits. So by how much does the total amount of deposits in the banking system increases increase? And by how much does the money supply increase? Okay, so we draw a TP off first. So first of all, you deposit this. So there's this deposit, this $100 bill into the banking system, right? And the reserve ratio ace 10%. Which means that in the first round, the re runs er is going to be 10% while long here still oh, and is $90. Okay, so this money stays in the banking system. So we can know that if the bank lane, this amount of money to another people and that people also I borrowed this money and then deposited into the bank, it is going to make the deposit 90 others, and then also the bank reserve 10% out of $90 which is nice dollars and then the longest 81. So on and on and on the deposit, the total number of deposit is going to be 100 plus 90. So I will write it down. 100 plus 90 and a plus 90 point 98 point Oh, 0.9, which is 81 and then 81 times 0.9. So the sum of the total deposit is going to bring the sum of all these numbers. So it is going to be one minus 0.9 and ah, numerator is the 100. So the total deposit is going to be 1000. Okay, So the total deposit gained. A banking system increased by $1000 which is so so how much the money supply increase. So by $1000
View More Answers From This Book
Find Another Textbook
01:21
'What is the answer Assume that the listing and selling brokers sp…
01:09
"Susan Munro's first choice was sandwich but due to the long line …
02:30
'Thirty million pounds of snack food were eaten during a recent Super B…
04:37
'Ferrari Inc_ had returns of 11 percent; 18 percent; -21 percent; 5 per…
01:01
"Because of the devastation caused by the California wildfires in 2020,…
01:45
'During the 2020 COVID-19 pandemic many managers had to make decisions …
"The prime minister of Canada, curators at New York's Museum of Mo…
01:35
"Kevin Johnson is the CEO of Starbucks He is responsible for developing…
04:39
'LU PLSQuestion 1Assuming the average heartbeat is 73 beats per…
01:43
'9) One of the most important impact of the money is it Affect on the e…
