Question
I don't understand what I am doing wrong. Please help me to solve d and e. transaction deposit after portfolio switch = 750+10=$760 billion. reserve
I don't understand what I am doing wrong. Please help me to solve d and e.
transaction deposit after portfolio switch = 750+10=$760 billion.
reserve requirement = 0.05*760=$38 billion.
hence , total lending capacity = 760-38=$722 billion.
total lending capacity of the banking system after the portfolio switch will be $722 billion.
e.
if the banks fully utilize their lending capacity
total transaction deposits with bank =$760 billion.
cash reserve ratio=0.05
total reserve = 0.05*760 = 38
money leant by banks in the economy = 760-38=$ 722 billion
cash held by public = 450-10=$440 billion
total money supply = $722+440= $ 1162 billion
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