Deposits = [bank Reserves] / [desired Reserve-deposit Ratio] Money Supply

Deposits = [bank reserves] / [desired reserve-deposit ratio] Money supply = [currency held by the public] + [deposits] Let X = currency held by the public = bank reserves. Then the money supply equals X + X / [desired reserve-deposit ratio] As the money supply is 2450 and the public holds 700 in currency, bank deposits must equal 1750. Now to find the desired reserve-deposit ratio, we can use the formula : [desired reserve-deposit ratio] = [bank reserves] / [deposits] = 350 / 1750 = 0.2

To calculate the money multiplier, we can use the formula : [money multiplier] = 1 / [desired reserve ratio] = 10 To calculate the excess reserves, we must first determine the desired reserves = [deposits] � ([reserve ratio] / 100) = $10,000. Now, we can use the formula : [excess reserves] = [actual reserves] - [desired reserves] to get the excess reserves of $14,000. To calculate the maximum amount that the banking system might lend, we can use the formula [maximum demand-deposit creation] = [excess reserves] � [money multiplier] Reserves should be $24,000, because this amount does not change when the bank makes new loans. Securities should be $36,000, because this amount does not change when the bank makes new loans. Loans should be $180,000, because it should be equal to the original amount listed plus the amount of the new loans. Demand Deposits should be $240,000, because it should be equal to the original amount listed plus the amount of the new loans.

f the banks' desired reserve ratio (rr) is 2.5% and the public's currency ratio (cr) is 7.5% an increase in high powered money (H) of $1,000 will result in:an increase in deposits of $10,000 and an increase of $750 in the public's cash holdings.

a) The Bank A reserves should be $36.00, but you have not entered this. This will cost you 1 mark. The Bank A loans should be $84.00, but you have not entered this. This will cost you 1 mark. The Bank A Deposits should be $120.00, but you have not entered this. This will cost you 1 mark. b) The Bank B reserves should be $25.20, but you have not entered this. This will cost you 1 mark. The Bank B loans should be $58.80, but you have not entered this. This will cost you 1 mark. The Bank B Deposits should be $84.00, but you have not entered this. This will cost you 1 mark. c) The Bank C reserves should be $17.64, but you have not entered this. This will cost you 1 mark. The Bank C loans should be $41.16, but you have not entered this. This will cost you 1 mark. The Bank C Deposits should be $58.80, but you have not entered this. This will cost you 1 mark. d) Deposits: The first deposit should be $120.00, but you have not entered this. This will cost you 1 mark. The second deposit should be $84.00, but you have not entered this. This will cost you 1 mark. The third deposit should be $58.80, but you have not entered this. This will cost

you 1 mark. The fourth deposit should be $41.16, but you have not entered this. This will cost you 1 mark. Expression: Your answer was: Not Answered The correct answer was: 120 The first amount here is the amount of the initial deposit. You will lose 1 mark for this part. Your answer was: Not Answered The correct answer was: 1 The first term of the sum is the proportion of the initial cash deposited in the bank the first time. It is always 1. You will lose 1 mark for this part. Your answer was: Not Answered The correct answer was: 0.7 The second term of the sum is the proportion of the first deposit that was loaned by the first bank and deposited in the second. It is calculated as 1 - [reserve ratio]. You will lose 1 mark for this part. Your answer was: Not Answered The correct answer was: 0.7 The third term of the sum is the proportion of the previous second deposit that makes it to the third bank from the second. This is also calculated as 1- [reserve ratio]. You will lose 1 mark for this part. e) Money multiplier: Your answer was: 0.00 The correct answer was: 3.33 The multiplier, which is the sum of all the numbers in the square brackets in the previous part, can be otherwise calculated as [1 / (1 - 0.7)] = 3.33. You will lose 1 mark for this part. New money supply: Your answer was: $0.00 The correct answer was: $399.60 The new money supply is the original deposit multiplied by the multiplier. In this case it is calculated as: 3.33 � $120.0 = $399.6. You will lose 1 mark for this part. f) Your answer was: $0.00 The correct answer was: $222.86 The amount of money created can be calculated as [multiplier � primary deposit] primary deposit. In this case the calculation is as follows: New money supply = $120.0 � [ 1 / ( 1 - 0.6499999999999999 )] or $120.0 � [ (1 / 0.35000000000000003] = $342.86. The amount of money created = [new money supply] - [original deposit] The amount of money created is therefore $222.86. You will lose 1 mark for this part.