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Posted on October 20, 2016

Academic help online
ABBIX has a complex financial system with the following relationships: the ratio of required reserves to total deposits is 15 percent, and the ratio of noncheckable deposits to checkable deposits is 40 percent. In addition, currency held by the nonbank public amounts to 20 percent of checkable deposits. The ratio of government deposits to checkable deposits is 8 percent. Initial excess reserves are $900 million F. Now assume that currency held by the nonbank public, drops to 15 percent of checkable deposits and the ABBIX’s target money supply is charged to $3.0 billion. What would the required reserves ratio have to be to reach the new target M1 money supply amount? Assume the other oringinal ratio relationships hold.

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