Money, Multiplier
Assume that the banking system has no excess reserves.
· Find the maximum amount of check-writing deposits when bank reserves total $10,000 and the reserve requirement is (1) .10, (2) .09, and (3) .08.
· Find the change in the reserve requirement needed to increase the maximum amount of check-writing deposits from $100,000 to $102,564 when reserves total $10,000 and the initial reserve requirement is .10.
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Solution Preview
1. The bank's reserves are 10,000
the reserve requirement is 0.10
Then the maximum amount of deposit is 10000/0.1=100000
So the maximal loanable amount is ...
Solution Summary
The expert finds the change in the reserve requirement needed to increase the maximum amount of check-writing deposits.
$2.19