Rework Problem 8, assuming that the cash held by the public drops to $500,000 with an equal amount becoming excess reserves and the required reserves ratio drops to 12 percent.
Answer to relevant QuestionsThe COMPLEX financial system has these relationships: the ratio of reserves to total deposits is 12 percent and the ratio of noncheckable deposits to checkable deposits is 40 percent. In addition, currency held by the ...Describe the effects of tax policy on monetary and credit conditions. Explain the potential for deposit expansion when required reserves average 10 percent and $2,000 in excess reserves are deposited in the banking system. Describe the Bretton Woods system for setting currency exchange rates. What are special drawing rights (SDRs) and how are they used to foster world trade? Describe the various ways by which an exporter may finance an international shipment of goods. How may commercial banks assist the exporter in the collection of drafts?
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