The Agricolan monetary base is 1 000 000 florins The public always The Agricolan monetary base is 1,000,000 florins. The public always holds half its money supply as currency and half as deposits. Banks hold 20% of deposits in the form of reserves. Starting with the initial creation of a monetary base that accompanies the purchase by the central bank of 1,000,000 fl worth of coconuts from the public, show the consolidated balance sheet of the banks after they first receive deposits, after a first round of loans and redeposits, and after a second round of loans and redeposits. (Don’t forget that the public keeps only half its money in the form of bank deposits.) Show the balance sheets of the central bank, the banking system, and the public at the end of the process of multiple expansion of loans and deposits. What is the final value of the money supply?

The Agricolan monetary base is 1 000 000 florins The public always The Agricolan monetary base is 1,000,000 florins. The public always holds half its money supply as currency and half as deposits. Banks hold 20% of deposits in the form of reserves. Starting with the initial creation of a monetary base that accompanies the purchase by the central bank of 1,000,000 fl worth of coconuts from the public, show the consolidated balance sheet of the banks after they first receive deposits, after a first round of loans and redeposits, and after a second round of loans and redeposits. (Don’t forget that the public keeps only half its money in the form of bank deposits.) Show the balance sheets of the central bank, the banking system, and the public at the end of the process of multiple expansion of loans and deposits. What is the final value of the money supply?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter29: Exchange Rates And International Capital Flows

Section: Chapter Questions

Problem 24CTQ: Can you think of any major disadvantages to dollarization? How would a central bank work in a...

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