Question

An economy has a borrowed monetary base of $500 billion and a nonborrowed monetary base of $780 billion. The required reserve ratio is 10%. The total amount of currency in circulation is $1,350 billion. The total checkable deposits is $2,215 billion. The banking system holds a total of $400 billion in excess reserves.

What is the monetary base (in billion of $) of the economy? Round your answer to at least 2 decimal places. (E.g. $1,234,567,890 should be entered as 1.23)

An economy has a borrowed monetary base of $500 billion and a nonborrowed monetary base of $780 billion. The required reserve ratio is 10%. The total amount of currency in circulation is $1,350 billion. The total checkable deposits is $2,215 billion. The banking system holds a total of $400 billion in excess reserves.

What is the currency ratio (in decimal form)? Round your answer to at least 4 decimal places.

An economy has a borrowed monetary base of $500 billion and a nonborrowed monetary base of $780 billion. The required reserve ratio is 10%. The total amount of currency in circulation is $1,350 billion. The total checkable deposits is $2,215 billion. The banking system holds a total of $400 billion in excess reserves.

What is the excess reserve ratio (in decimal form)? Round your answer to at least 4 decimal places.

Answer 1

Calculate the monetary base -

Monetary base = Borrowed monetary base + Non-borrowed monetary base

Monetary base = $500 billion + $780 billion

Monetary base = $1,280 billion

The monetary base of the economy is $1,280 billion.

Calculate the currency ratio -

Currency ratio = Currency in circulation/Total checkable deposits

Currency ratio = $1,350 billion/$2,215 billion

Currency ratio = 0.6095

The currency ratio is 0.6095

Calculate the excess reserve ratio -

Excess reserve ratio = Excess reserves/Total checkable deposits

Excess reserve ratio = $400 billion/$2,215 billion

Excess reserve ratio = 0.1806

The excess reserve ratio is 0.1806