1- Please, express how inflation affect the three functions of money. 2- Explain the role of commercial banks in terms o
Posted: Sun May 29, 2022 7:36 pm
1- Please, express how inflation affect the three functions of
money.
2- Explain the role of commercial banks in terms of
expansion of money supply, emphasizing the limitations of the
process.
3- There is an initial deposit in RBC Bank of
$5,000.00. The required reserve ratio is 5%. Assume the
bank does not keep any excess reserves and people deposit all money
into the banking system. Answer these questions: (think that
bank has a fractional reserve banking system):
a- How much are RBC Bank’s required reserves with this
deposit?
b- By how much do RBC Bank’s excess reserves increase with
this deposit?
c-Assume RBC bank loans out its excess reserves to
Jennifer. Jennifer buys a new boat with her loan and
therefore writes a check on her new account to Jack. Jack
then deposits this check in Union Bank. Union Bank then must
keep $_____ as required reserves and it lends out $___to
Angelina. At this point in the process, by how much has the
money supply increased (assuming the initial deposit is new money)?
___
d-If this process continues and all checks are re-deposited back
into the banking system, by how much will the money supply increase
when the process is complete? $___
money.
2- Explain the role of commercial banks in terms of
expansion of money supply, emphasizing the limitations of the
process.
3- There is an initial deposit in RBC Bank of
$5,000.00. The required reserve ratio is 5%. Assume the
bank does not keep any excess reserves and people deposit all money
into the banking system. Answer these questions: (think that
bank has a fractional reserve banking system):
a- How much are RBC Bank’s required reserves with this
deposit?
b- By how much do RBC Bank’s excess reserves increase with
this deposit?
c-Assume RBC bank loans out its excess reserves to
Jennifer. Jennifer buys a new boat with her loan and
therefore writes a check on her new account to Jack. Jack
then deposits this check in Union Bank. Union Bank then must
keep $_____ as required reserves and it lends out $___to
Angelina. At this point in the process, by how much has the
money supply increased (assuming the initial deposit is new money)?
___
d-If this process continues and all checks are re-deposited back
into the banking system, by how much will the money supply increase
when the process is complete? $___