Suppose that banks in the US commercial banking system are holding $1 billion in

Question

Suppose that banks in the US commercial banking system are holding $1 billion in excess reserves, but want to keep only $0.5 billion in excess reserves. If the required reserve ratio is 20 percent, and other things remain constant, what is the limit to depand deposit expansion in the system?
$0.5 billion $2.0 billion $2.5 billion $5.0 billion Suppose that banks in the US commercial banking system are holding $1 billion in excess reserves, but want to keep only $0.5 billion in excess reserves. If the required reserve ratio is 20 percent, and other things remain constant, what is the limit to depand deposit expansion in the system?
$0.5 billion $2.0 billion $2.5 billion $5.0 billion $0.5 billion $2.0 billion $2.5 billion $5.0 billion $0.5 billion

Explanation / Answer

limit be x

20% of x=0.5 billion

x/5=0.5

x=2.5 billion

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.