Reserve ratios and level of deposits

Reference no: EM1313796

Assuming individuals hold no cash (all cash is in bank vaults as reserves), calculate the simple money supply from the following reserves requirements and deposits in the systems. 5 Points each, 30 points subtotal

1.reserve ratio = 5% deposits = $10,000
2.reserve ratio = 10% deposits = $10,000
3.reserve ratio = 5% deposits = $20,000

Now assume individuals hold 25% of their money in the form of ratio.

Calculate the approximate real-world money multiplier and the money supply for situations a-c above.

Reference no: EM1313796

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