Posted by Ed on Thursday, July 12, 2007 at 6:15pm.
The economy contains 2000 $1 bills.
a) If people hold all money as currency, what is the quantity of money?
b) If people hold all money as demand deposits and banks maintian 100 % reserves, what is the quantity of money?
c) If people hold equal amounts of currency and demand deposits and banks maintain 100% reserves, what is the quantity of money?
d)If people hold all money as demand depositis and banks maintain a reserve ratio of 10%, what is the quantity of money?
e)If people hold equal amounts of currency and demand deposits and banks maintain 10% reserves, what is the quantity of money?
The input of the question is how banks create money.
The sites below should help you answer this question and the ones that you posted as well.
HOW BANKS CREATE MONEY OUT OF NOTHING
How banks ceate money - Google Search
Banks Create Money
How Banks Create Money
Money Creation - Banking Secrets That Banks Don't Want Published!
Money creation - Wikipedia, the free encyclopedia
How banks ceate money - Google Search
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