a) What do we mean by fractional reserve banking? b) Banks are required to have specie equal to 12.5% of the currency they have in circulation, Assume banks hold no excess reserves. Banks have $2000 in specie. What is the volume of bank notes in circulation? Are notes full bodied or partial backed? c) What is a demand deposit? Why did banks switch from issuing currency to creating demand deposits?
a) What do we mean by fractional reserve banking? b) Banks are required to have specie equal to 12.5% of the currency they have in circulation, Assume banks hold no excess reserves. Banks have $2000 in specie. What is the volume of bank notes in circulation? Are notes full bodied or partial backed? c) What is a demand deposit? Why did banks switch from issuing currency to creating demand deposits?
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 7CQ
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- a) What do we mean by fractional reserve banking?
b) Banks are required to have specie equal to 12.5% of the currency they have in circulation, Assume banks hold no
c) What is a demand deposit? Why did banks switch from issuing currency to creating demand deposits?
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