What is the value of M2 in billions of dollars? Assume the Fed’s reserve requirement is 10 percent and that the

What is the value of M2 in billions of dollars? Assume the Fed’s reserve requirement is 10 percent and that the

 

 

 

answer:

31.

since there is $19,800 reserves and that is 10% of all loans, therefore the bank will have a total of new loans of $198000 ( 19800/0.1).

now for the liabilities, there is $180000 worth of deposits but now the total assts needs to be $198000. so the bank will have a plus of ( $198000-$180000) = $18000 od deposits.

this amount is the increase in money supply in the economy.

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