question archive Ella just received a bonus at her job of $4,000 which she decides to put in a saving account at the local bank
Ella just received a bonus at her job of $4,000 which she decides to put in a saving account at the local bank
Subject:EconomicsPrice:2.88 Bought3
Ella just received a bonus at her job of $4,000 which she decides to put in a saving account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round the answer to the nearest dollar.
a. If the reserve requirement is 18%, how much will Ella's deposit increase the total value of checkable bank deposits? _____
b. If the reserve requirement is 7%, how much will Ella's deposit increase the total value of checkable bank deposits? _____
c. Decreasing the reserve requirement (increases, decreases) the money supply.
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a. The increase in the total value of checkable bank deposits will be $3,280.
(1 - 0.18) x $4,000 = $3,280
b. The increase in the total value of checkable bank deposits will be $3,720.
(1 - 0.07) x $4,000 = $3,720
c. As seen in the above example, decreasing the reserve requirement increases the money supply.
