The following is information about a banking system: New currency deposited in the system = $40...
The following is information about a banking system: New currency deposited in the system = $40 billion; desired reserve ratio = 20%; excess reserves prior to the currency deposit = $0.
106) Refer to the above information. The $40 billion deposit of currency into chequing accounts will create excess reserves of: A) $0. B) $40 billion. C) $20 billion. D) $32 billion. Answer: D
Homework Answers
Ans: $32 billion
Explanation:
When $40 billion is deposited, the desired reserve amount will increase by $40 billion * 0.2 = $8 billion.
So, this will create an excess reserve = $40 billion - $8 billion = $32 billion.
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The following is information about a banking system: New
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