Question
Suppose that an elderly relative dies and you discover a suitcase under their floorboards containing $40,000 in cash. You decide to deposit the cash at
Suppose that an elderly relative dies and you discover a suitcase under their floorboards containing $40,000 in cash. You decide to deposit the cash at a commercial bank. The target reserve ratio is 2% and the cash drain is 5%.
a.What is eventual total change in deposits?
b.Suppose that in the context of global economic uncertainty, the commercial banks considers lending to be riskier, and they hold an extra 3% as excess reserves. What is the total change in deposits?
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The End Of Poverty Economic Possibilities For Our Time
Authors: Jeffrey D Sachs, Bono
1st Edition
0143036580, 9780143036586
