Answer:
(a) Excess reserves = 200
(b) Monetary base (B) = 900
(c) Money multiplier = 10
Explanation:
Assuming that the required reserve ratio (missing in the question) is 0.1:
(a) Excess reserves = Reserves - Required reserves
Reserves = 400
Required reserves = Deposits x Required reserve ratio
= 2000 x 0.1
= 200
Hence, Excess reserves = 400 - 200
= 200
(b) Monetary base (B) = Reserves + Currency
= 400 + 500
= 900
(c) Money multiplier = 1 / Required reserve ratio
= 1 / 0.1
= 10
Answer:
a. 200
b.900
c. 10
Explanation:
a) Excess reserves = total reserves – required reserves
= 400 (given) – (deposits* required reserve ratio of which is usually 10%, so we assume it is 10%)
= 400 – (2000* 10%)
= 400-200
Excess reserves = $200
b) Monetary base = total reserves + currency
= 400 + 500 (given)
Monetary Base (B) = $900
c) The money multiplier is calculated as 1 divided by the required reserve ratio
Money multiplier = 1 / 10%
= 10
