Ask Question
BusinessBusiness
19 November, 20:53

Suppose that in a given month $40 million is deposited into the banking system while $50 million is withdrawn. Assume that the reserve requirement is 20 percent and that the banking system had no excess reserves at the beginning of the month. What is the maximum change that can be expected in the money supply as a consequence of these deposits and withdrawals

+5
Answers (1)
  1. 20 November, 00:51
    0
    Answer: Money Supply Decrease of $50 million.

    Explanation:

    $40 million was deposited while $50 million was withdrawn.

    The net change in the banking system would therefore be,

    = 40 - 50

    = - $10 million

    ($10 million) means that more money left than came in.

    The money supply can be calculated as the net change multiplied by the money multiplier.

    The Money Multiplier is denoted as 1/reserve requirement.

    Change in Money Supply is,

    = - 10 million * 1/20%

    = - $50 million

    Going by the negative number it means that Money Supply reduces by $50 million.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Suppose that in a given month $40 million is deposited into the banking system while $50 million is withdrawn. Assume that the reserve ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
A par value bond offers a coupon rate of 7 percent with semiannual interest payments. The effective annual rate provided by these bonds must be: a. equal to 3.5 percent b. greater than 3.5 percent but less than 4 percent c. equal to 7 percent d.
Answers (1)
Capital budgeting includes the evaluation of which of the following? A. Size of future cash flows onlyB. Size and timing of future cash flows onlyC. Timing and risk of future cash flows onlyD. Risk and size of future cash flows onlyE.
Answers (1)
By the end of year 8, Demarco and Tanya would have to pay a final payout of $120,887 $130,900 $143,152 $154,768.
Answers (2)
In microeconomics, a demand curve in the coordinate system relates the quantity purchased of a certain good, x, to the price of that good, y, as (x, y).
Answers (1)
If your company's product is dry soup mixes and canned soups, would a multidomestic strategy, a transnational strategy, or a global strategy seem to be more advisable?
Answers (1)
New Questions in Business
True or False? An environmental office is one that is concerned with managing resources so these resources do not negatively affect the environment.
Answers (2)
Bruno's stock should return 14 percent in a boom, 11 percent in a normal economy, and 4 percent in a recession. The probabilities of a boom, normal economy, and recession are 8 percent, 90 percent, and 2 percent, respectively.
Answers (1)
Employee engagement refers to being psychologically involved in, connected to, and committed to getting one's job done. Engaged employees often will do their jobs as if they own the company. A. TrueB. False
Answers (1)
Jesse is thinking about buying an entertainment system that will cost $1,800. The store will finance the purchase for 12 months at 20 percent interest. His payments will be $166.74. How much will he pay in interest over the life of the loan?
Answers (1)
Which strategy for merging two distinct cultures is most appropriate when the two merging companies are in unrelated industries or operate in different countries because the most appropriate cultural values tend to differ by industry and national
Answers (1)
Home » Business » Suppose that in a given month $40 million is deposited into the banking system while $50 million is withdrawn. Assume that the reserve requirement is 20 percent and that the banking system had no excess reserves at the beginning of the month.
Sign Up Forgot Password?