Question: QUESTION 4 [20 MARKS] (a) The model of multiple deposit creation or contraction outlines a few assumptions. Elaborate FOUR (4) assumptions of multiple deposit creation

QUESTION 4 [20 MARKS] (a) The model of multiple deposit creation or contraction outlines a few assumptions. Elaborate FOUR (4) assumptions of multiple deposit creation process. (12 marks) (b) Based on a 30% reserve requirement imposed by Bank Negara Malaysia, ABC Bank is able to increase its maximum demand deposit to RM166,666.67. Calculate the initial increase in deposits placed at ABC Bank. (4 marks) (c) Use the initial deposit in part (b) above to calculate the new maximum demand deposit if Bank Negara Malaysia announces a decrease in reserve requirement to 20%. Give a brief comment on your answer. (4 marks)

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