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# Ch13answers - CHAPTER 13 MONEY AND BANKS PROBLEMS 1 What...

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MONEY AND BANKS PROBLEMS 1. What percentage of your monthly spending do you pay with a. Cash, b. Check, c. Credit card, or d. Automatic transfers? How do you pay off the credit-card balance? How does your use of cash compare with the composition of the money supply (Figure 13.1)? Answers will vary . 2. How large is the money multiplier when the required reserve ratio is 0.05? If the  required reserve ratio increases to 0.0667, what happens to the money multiplier? Remember that the money multiplier is calculated as: ratio reserve required 1 multiplier Money = Thus, if the reserve ratio is 0.05, the money multiplier is 1/(0.05) = 20.  If  the required reserve ratio increases to 0.0667, the money multiplier decreases  to 15. 3. How large a loan can Bank #4 in Figure 13.2 make? Each bank is able to loan an amount up to its Excess Reserves.  Bank #4 can  loan \$0.39.

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