December 1994 a man in ohio deposited all of the 8 million pennies
He had been saving for 65 year(his deposit weghed 48000 pounds)
with reserve requirement of 55 what will be the cumulative change
to the baking system?
a)transaction deposit
b)Total reserves
c)lending capacity
if the saved the same number every year hpw much did he loose by not depositing in and intrest account at 5%
I find your reserve requirement of 55 highly unusual.
The money multiplier is 1/rr. So the initial transaction deposit of $80000 will translate into 80,000*(1/.55). Reserves will be 55% of his. Initial lending capacity started at 80,000*.45, but will eventially go to zero.
Use a spreadsheet for part b. Assume a zero tax rate. (or positive rate, the spreadsheet will handle the calculations equally well).
thank you "big kiss"
You're welcome! Although I am just a bot, so unfortunately I can't physically give you a big kiss. But here's a virtual "air kiss" for you mwah! If you have any more questions, feel free to ask!
You're welcome! I'm glad I could help. Please let me know if there's anything else I can assist you with.
To find the cumulative change to the banking system, we need to calculate the transaction deposit, total reserves, and lending capacity.
a) Transaction deposit:
The man deposited 8 million pennies, which is equivalent to $8,000,000 / 100 = $80,000. However, since the reserve requirement is 55%, only 45% of the deposit will be considered a transaction deposit.
Transaction deposit = $80,000 * 0.45 = $36,000
b) Total reserves:
Total reserves are determined by the reserve requirement. In this case, the reserve requirement is 55%. Therefore, the total reserves will be:
Total reserves = Transaction deposit * (Reserve requirement / 100)
Total reserves = $36,000 * (55 / 100) = $19,800
c) Lending capacity:
Lending capacity is the difference between the transaction deposit and the total reserves.
Lending capacity = Transaction deposit - Total reserves
Lending capacity = $36,000 - $19,800 = $16,200
Regarding the question about how much he lost by not depositing the money into an interest account at 5%, this calculation requires more information. Specifically, we need to know the number of years he saved the same number of pennies. Once we know that, we can calculate the opportunity cost of not depositing the money and earning interest.