In Macroland there is $12,000,000 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 12.5 percent, deposits in Macroland equal and the money supply equals _.

Explanation:The reserve/deposit ratio is the percentage amount of money (deposits) that commercial banks must not lend out or invest, the reserve ratio is usually fixed by the central banks in order to control inflation and volume of money in circulation within a given country in a particular time.

If the banks desired a Reserve/deposit ratio of 12.5% then deposits in macroland will equal to

Solutions

Initial bank deposit=12000000/2

Initial bank deposit=6000000

The reserve)deposit will calculated as follows (12.5/100%)=0.125

If banks desired to keep 12.5% it deposit ratio will be 1/0.125=8*6000000=$48,000,000.

Hence the money in circulation/supply will be the desired deposited money+public money=$48,000,000+6000000

=$54,000,000.

In Macroland there is $12,000,000 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 12.5 percent, deposits in Macroland equal ______ and the money supply equals _______.

Respuesta :

Otras preguntas

In Macroland there is $12,000,000 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 12.5 percent, deposits in Macroland equal and the money supply equals _.