In the nation of Orcam, people hold $2,000 of currency and $10,000 of demand deposits in the only bank, Orcbank. The reserve–deposit ratio is 0.2.
What are the money supply, the monetary base, and the money multiplier?
Money Supply =
Money Multiplier =
Monetary Base =
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In the nation of Orcam, people hold $2,000 of currency and $10,000 of demand deposits in the only bank, Orcbank. The reserve–deposit ratio is 0.2.
Assume that Orcbank is a simple bank: it takes in deposits, makes loans, and has no capital. Show Orbank’s balance sheet. What value of loans does the bank have outstanding?
Orcbank | |||
---|---|---|---|
Assets | Liabilities | ||
Reserves | $2,000 | Deposits | $10,000 |
Loans | ? | ||
Total | $10,000 | Total | $10,000 |
Loans = $
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In the nation of Orcam, people hold $2,000 of currency and $10,000 of demand deposits in the only bank, Orcbank. The reserve–deposit ratio is 0.2.
Orcam’s central bank wants to reduce the money supply by 10 percent. Should it buy or sell government bonds in open-market operations? Assuming no change in the money multiplier, calculate, in dollars, how much central bank needs to transact.
Orcam’s Central Bank should buy $ of bonds.
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