Calculate the national bank of the undemocratic republic

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Reference no: EM131159861

Banks can create money through lending from excess reserves.

a) The National Bank of the Undemocratic Republic of Swagnervania receives $1.5 million. The Federal Reserve of the Undemocratic Republic of Swagnervania stipulates all commercial banks use a required reserve ratio of 7%. Calculate the National Bank of the Undemocratic Republic of Swagnervania excess reserves. What is the maximum amount of money that can be created by this $1.5 million?

b) So what economically defendable explanation is there for the National Bank of the Undemocratic Republic of Swagnervania to get the $1.5 million in the first place?

Reference no: EM131159861

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