Question

icay Creaen !.trs20,000 euhom tz ky while the required reterve raso ia 2356 wat is the misimum and mimum change to the mopry supply 2. Assune Holen gave Jesse a $10,000 check and Jesse deposited the chock in b aooou. Fled be minimum md manium change is the money pepply a l0% equired reserve rato. 3. What is the minimum and im chage to the moey supply it George tock maney ($20,000) (RRR-10%)ost af abe, he had steed for about 20 years and deposited the money in his chocking acou Attime when the requiredresom nio is 15% the Fed printed and distributed $200,000 into checking accounts Discuss the mininum and maximum change of the monry supply 4. MacBook Pro 8 7 6 5 3

Answer 1

Ans 1)

If $20000 fell from the sky then there are two possible scenarios to think over

Scenario 1)

If money is left over as cash and not deposited any fraction of it into checkable deposits managed by banks then Money supply will increase by $20,000.

Minimum and Maximum change is $20000

Scenario 2)

If money is deposited in checkable deposits and no fraction is kept in cash where RR=20% then maximum change in Money Supply is 20000/(1-0.8)=$400,000. Minimum change is $20,000

Scenario 3)

If fraction of this $20000 is deposited in bank then Maximum change in money supply=fraction*20000/(1-0.8)=400000*fraction , Minimum change=$20,000

Ans 2)

Minimum change in the money supply =$10000

Maximum change in the money suppy when RR=10% is 10000/0.1=$100,000

Ans 3)

The money was with George in form of cash for 20 years therefore minimum change is $0 but maximum change at RR=10% is 20000/(1-0.9)=$200,000

Ans 4)

Minimum change in MS=$200,000

Maximum change in MS=$200,000/0.15=$1,333,333.33