Question: QUESTION 4 [20 MARKS] [UNIT 2] (a) The model of multiple deposit creation or contraction outlines a few assumptions. Elaborate FOUR (4) assumptions of

QUESTION 4 [20 MARKS] [UNIT 2] (a) The model of multiple deposit

QUESTION 4 [20 MARKS] [UNIT 2] (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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