Homework Answers
a) Ans is $6500
Explanation:
Required Reserves = Deposits*Required reserve ratio
= $70000*5%
=$3500
Excess Reserves=Total Reserves-Required Reserve=10000-3500=$6500
b) Ans is $6500
Maximum amount of loan that can be given=Excess Reserves=$6500
c) Ans is $6500
Explanation:
M1 is sum of currency in circulation and deposits. So,
Increase in M1=Amount held in currency+loan amount that has been deposited in another bank
=0+$6500
=$6500
Add Answer to:
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