Chapter 12: Problem 450
Describe the role of a financial intermediary. Give an example.
Chapter 12: Problem 450
Describe the role of a financial intermediary. Give an example.
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Get started for freeIf a bank has total reserves of \(\$ 1000\) and demand deposits of \(\$ 2000\), what is the amount by which demand deposits can expand in the banking system, assuming a \(20 \%\) required reserve ratio.
Suppose a bank acquires an additional \(\$ 1\) of deposits and no required reserve ratio exists. By how much could this one dollar deposit theoretically expand the money supply?
Explain why yield curves may slope downward in periods of prosperity and high interest rates; and why they may slope upward in periods of recession.
What are "required reserves"? What are "actual reserves" and "excess reserves"?
Suppose the banking system as a whole has \(\$ 100,000,000\) in deposits, with no excess reserves. What is the potential change in the money supply if the Fed a) lowers the reserve requirement from \(25 \%\) to \(20 \%\); b) raises the reserve requirement from \(25 \%\) to \(331 / 3 \%\) ?
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