Question: Please give a precise explanation! Thank you :)_ 7. Commercial banks in the economy of Vistulaland use any opportunity to create new credit. Their obligatory

Please give a precise explanation! Thank you :)_

Please give a precise explanation! Thank you :)_ 7. Commercial banks in

7. Commercial banks in the economy of Vistulaland use any opportunity to create new credit. Their obligatory cash reserves (R) equal 1000, which is 10% of all the deposits (D). The amount of cash in circulation in the non-banking sector (C) is 8000. a) Calculate: the high-powered money, the supply of money and the money multiplier in Vistulaland. b) The inhabitants of Vistulaland changed their desired ratio of cash in circulation to total bank deposits: in results, 2000 was withdrawn out of cash in circulation and deposited in a bank. The cash reserve ratio did not change. Calculate the new money multiplier in this economy. c) Did the supply of money in Vistulaland change? d) What was the additional supply of money created by the banking sector? e) Why didn't the commercial banks in Vistulaland simply create additional deposits of 20 000? f) Assuming that the money creation process has come to an end, check whether the bank's cash reserves (R) to deposits (D) ratio is still in line with the obligatory cash reserve ratio. 7. Commercial banks in the economy of Vistulaland use any opportunity to create new credit. Their obligatory cash reserves (R) equal 1000, which is 10% of all the deposits (D). The amount of cash in circulation in the non-banking sector (C) is 8000. a) Calculate: the high-powered money, the supply of money and the money multiplier in Vistulaland. b) The inhabitants of Vistulaland changed their desired ratio of cash in circulation to total bank deposits: in results, 2000 was withdrawn out of cash in circulation and deposited in a bank. The cash reserve ratio did not change. Calculate the new money multiplier in this economy. c) Did the supply of money in Vistulaland change? d) What was the additional supply of money created by the banking sector? e) Why didn't the commercial banks in Vistulaland simply create additional deposits of 20 000? f) Assuming that the money creation process has come to an end, check whether the bank's cash reserves (R) to deposits (D) ratio is still in line with the obligatory cash reserve ratio

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