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customer deposits$10,000 in Bank A,
(i) Explain what happens to Bank A (initially) and two additional steps in the
deposit expansion process, assuming a 5 % reserve requirement.
(ii) When will the money creation process end? Explain. 3marks
(iii) How much do deposits and loans increase for the banking system when
the process is completed? 3marks
(iv) What is the impact, if any, on the level of reserves and the monetary base?
(v) Use a T-account to show the banking system in equilibrium.
(vi) If the required reserve ratio remains 5% but the banking system now
holds excess reserves of 5%, calculate the money multiplier and explain
the impact of excess reserves on the money creation process
In 1944, finance specialists and bankers from around the world met to discuss what the post-WWII monetary system would be. Given the instability of the pre-war period, the goal was to create a new system. The outcome of this was the Bretton Woods system, which had the U.S. dollar as the world reserve currency linked to gold at $35 an ounce. All other currencies were tied to the dollar with limits on how much they could appreciate or depreciate. The system lasted until the 1970s, when the United States decided to move away from gold convertibility. The modern system is based on supply and demand for currency and a managed float. Discuss the following in your main post:
The U.S. dollar remains the world's reserve currency. Is this good for the United States, and if so, why?
•People usually think a "strong" dollar is good. Is this true for U.S. businesses, and does it help or hurt the U.S. balance of payments?
Price ($) Demanded quantity (#) Supplied quantity (#)
6 0 1000
5 200 800
4 400 600
3 600 400
2 800 200
1: 1000 0
Give the coefficients in the equations for demand and supply: Qd = a+ bp and Qs = alpha a + alpha bp (the p is not alpha only a and b) find a, b, alpha a, alpha b