Calculating Quantity of Money: Currency, Demand Deposits, and Bank Reserves

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In summary, the economy contains 2000 $1 bills. If people hold all money as currency, the quantity of money is $2000. If people hold all money as demand deposits and banks maintain 100% reserves, the quantity of money is also $2000. If people hold equal amounts of currency and demand deposits and banks maintain 100% reserves, the quantity of money is $4000. If people hold all money as demand deposits and banks maintain a reserve ratio of 10%, the quantity of money is $20,000. If people hold equal amounts of currency and demand deposits and banks maintain 10% reserves, the quantity of money is $22,000.
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413
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The economy contains 2000 $1 bills.

a) If people hold all money as currency, what is the quantity of money?
-Is quantity of money = $2000?

b) If people hold all money as demand deposits and banks maintian 100 % reserves, what is the quantity of money?
-Is quantity of money also $2000?

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?

thanks for any help.
 
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  • #2
Is this a homework assignment?
 
  • #3
no, it a textbook question and i am studying for exam.
 
  • #4
You should study the text before trying to solve the questions.
 
  • #5
413 said:
no, it a textbook question and i am studying for exam.

Coursework and homework questions belong in the Homework Help forums, which is where I'm moving this thread now. It's also a set of math questions, not philosophy & social science.
 
  • #6
These are not technically math questions. These regard the reserve ratios banks must keep at the Fed and the amount of money the banking system can lend against those said reserves. That is if I am reading these questions correctly. If the reserve ratio is 10% then for every dollar the banks lend they must have 10 cents stored at the FED to back that note up.
 
  • #7


go to this website...the entire question is on it, i think its the last question,

http://www.uwm.edu/~amurshid/principles/afinal02b.pdf

I think I'm in your class haha
 
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1. What is currency?

Currency is a medium of exchange that is used to facilitate the buying and selling of goods and services. It can take the form of physical money, such as coins and notes, or digital money, such as bank deposits and cryptocurrencies.

2. How is currency created?

Currency is created by central banks, which are responsible for regulating the money supply in a country. They can print physical money or create digital money through various monetary policy tools, such as setting interest rates and buying or selling government securities.

3. What factors affect currency value?

The value of a currency is determined by supply and demand in the foreign exchange market. Factors that can influence the demand for a currency include economic growth, interest rates, political stability, and trade policies. Supply is affected by central bank policies and the level of international reserves.

4. How does currency exchange work?

Currency exchange is the process of converting one currency into another. This is typically done through a financial institution, such as a bank or currency exchange bureau, which will buy and sell different currencies at an agreed-upon exchange rate. The exchange rate is determined by the supply and demand for each currency.

5. What are the different types of currency?

There are three main categories of currency: fiat, commodity, and digital. Fiat currency is government-issued and not backed by a physical commodity. Commodity currency is backed by a tangible asset, such as gold or silver. Digital currency, such as cryptocurrencies, is decentralized and operates independently of a central authority.

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