What are the reserve-deposit ratio

Assignment Help Microeconomics

Reference no: EM132207706

Question: In the nation of Dorne, the monetary base is $1,000,000. Suppose that the people of Dorne hold 1/4 of their money in the form of currency and 3/4 in bank deposits. Banks hold 20% of their deposits in reserve. Answer each of the following parts. Show your work.

a. What are the reserve-deposit ratio, the currency-deposit ratio, the money multiplier, and the money supply for Dorne?

b. One day, fear about the banking system strikes the population, and people now want to hold 1/3 their money in the form of currency. If the Iron Bank (Dorne's central bank) does nothing, what is the new money supply?

c. If, in the face of the panic in part b, the government of Dorne decides to introduce deposit insurance. This insurance protects deposits in the event of a bank failure (i.e., the government will reimburse the depositors, if the bank fails). What response, if any, would you anticipate from households? Explain.

Reference no: EM132207706

Questions Cloud

The company plan to acquire to satisfy predicted demand : How many cells should the company plan to acquire to satisfy predicted demand under these conditions?

Estimate the price and income demand elasticities : If the subsequent year the retail price is expected to rise to 38,500 GBP, whilst income should increase around 5%. Estimate demand and manufacturer's revenue.

Store the updated prices in the second column of the array : Write the program so that it asks the user for a dollar amount by which each price should be increased.

Write a program that allows users to encrypt files : We will implement two simple encryption methods. Have the following GUI components: Have a button that when pressed opens a FileChooser.

What are the reserve-deposit ratio : In the nation of Dorne, the monetary base is $1,000,000. Suppose that the people of Dorne hold 1/4 of their money in the form of currency and 3/4 in bank.

Write a program that asks the user for an integer value : Write a program that asks the user for an integer value and that outputs the bit pattern for that integer, starting with the most significant bit.

Evaluation of adequacy of the surgical margins : Two separately identified basal cell carcinomas are submitted for diagnosis and evaluation of adequacy of the surgical margins.

Changes between prior to and after buying equipment : Compute the productivity changes between the Prior to and after buying the new equipment.

Operation in fees generated per dollar of input : Calculate the multifactor productivity for this operation in fees generated per dollar of input.

User Account

All Pages