Suppose that the reserve requirement for checking deposit is 10 percent and that banks do not hold any excess reserve

Business, Finance, Economics, Accounting, Operations Management, Computer Science, Electrical Engineering, Mechanical Engineering, Civil Engineering, Chemical Engineering, Algebra, Precalculus, Statistics and Probabilty, Advanced Math, Physics, Chemistry, Biology, Nursing, Psychology, Certifications, Tests, Prep, and more.
Post Reply
answerhappygod
Site Admin
Posts: 899603
Joined: Mon Aug 02, 2021 8:13 am

Suppose that the reserve requirement for checking deposit is 10 percent and that banks do not hold any excess reserve

Post by answerhappygod »

Suppose that the reserve requirement for checking
deposit is 10 percent and that banks do not hold any excess
reserves
Now, suppose BNM lower the reserve requirement to 5
percent, but banks choose to hold another 5 percent of deposits as
excess reserves. Why might banks do so? What is the overall
change in the money multiplier and the money supply as
a result of these
actions?
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!
Top
Post Reply

Return to “Archived Questions & Answers”