5 good questions on "Reserves, Bank deposits, and the money multiplier"

What reduces the size of the multiplier.
When laonded funds are held in borrower's wallets and not deposited in banks, we can also say that it has been leaked out
What is the monetary system in which funds are always deposited in bank accounts? How is the money supply determined in this monetary system?
cheequable deposit only

  • the bank keeps the reserve ratio
  • the bank lends out all the excess reserves
  • this money that is loaned will end up in another bank account
  • this starts the money multiplier
What do we call the reserves that are over and above ht amount needed to satisfy the desired ratio?
Excess reserves
What is rr the symbol for?
Reserve ratio
1000+(1000*(1-rr)) +(1000*(1-rr)^2)+(1000*(1-rr)^3)+(1000*(1-rr)^n)
What will happen when the excess reserves increases? What is the value of the chequable deposit only?
  • This will increase the total value of chequable deposits
  • the total value of the chequable deposits will be equal to the value of bank reserves divided by the reserve ratio
  • A unique study and practice tool
  • Never study anything twice again
  • Get the grades you hope for
  • 100% sure, 100% understanding
Remember faster, study better. Scientifically proven.
Trustpilot Logo
  • Higher grades + faster learning
  • Never study anything twice
  • 100% sure, 100% understanding
Discover Study Smart