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    Reserve Rate in macroeconomics

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    1. Assume Company X deposits $80,000.00 in cash in commercial bank Y. If no excess reserves exist at the time this deposit is made and the reserve ratio is 30%, then bank Y can increase the money supply by a maximum of ???

    2. If the required reserve ratio is 15% and commercial bankers decide to hold additional reserves equal to 10%, what would be the relevant deposit expansion multiplier??

    3. If (1) the current interest rate is 6%, (2) at 6% interest rate a business investment is $3 billion and at 4% business investment would be $5 billion, (3) the MPC is 0.75, and (4) the Fed buys securities and lowers the interest rate by 2%, what would happen to GDP?

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    https://brainmass.com/economics/banking/reserve-rate-macroeconomics-412495

    Solution Preview

    1. Assume Company X deposits $80,000.00 in cash in commercial bank Y. If no excess reserves exist at the time this deposit is made and the reserve ratio is 30%, then bank Y can increase the money supply by a maximum of ???

    80'000 / 30% = 80'000/0.3 = +500'000 = 266,666.67.

    2. If the required reserve ratio is 15% and commercial ...

    Solution Summary

    GDP and the reserve rate in macroeconomics is emphasized in the solution.

    $2.19