Please answer the following completely! \"A, B, C & D\" 12. economy of Elmendyn
ID: 1188111 • Letter: P
Question
Please answer the following completely! "A, B, C & D"
12. economy of Elmendyn contains 2,000 The $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 maintain 100 percent reserves, what is the quantity of money? c. If people hold equal amounts of currency and demand deposits and banks maintain 100 percent reserves, what is the quantity of money? d. If people hold all money as demand deposits and banks maintain a reserve ratio of 10 percent, what is the quantity of money?Explanation / Answer
A)
The amount of money held will be $2000, as no credit is created as people do not deposit in banks.
B)
The amount of money held will be $2000, as no credit is created as banks maintain 100% reserves.
The amount of money held will be $2000, as no credit is created as whatever is deposited in banks gets converted to reserves.
D)
All the money is deposited into banks, and they maintain a reserve of 10%.
Amount of money = Initial Money / Reserve Ratio
= 2000/0.1 = $20000