Answer to Question #50277 in Macroeconomics for Pamala McCauley

Question

To Control inflation by limiting bank loans, the peoples bank announced that it would raise the required reserve ratio for commercial banks from 21% to 21.5%. -china morning post 2011 Q: compare the required reserve ratio in china 2011 and the required reserve ration on checkable deposits in the united states today.
Q: if the currency drain ratio in china and the united states is 10% of deposits, compare the money multipliers in the two countries.

Answer 1

The peoples bank announced that it would raise the required reserve ratio for commercial banks from 21% to 21.5%.
Q: The required reserve ratio in china 2011 is higher than the required reserve ratio on checkable deposits in the united states today.
Money multiplier m = 1/RR, where RR - required reserve ratio.
Q: "Currency Drain Ratio" is the ratio of cash to deposits, i.e. C/ D. If the currency drain ratio in china and the united states is 10% of deposits, so the money multiplier in China is less, then in United States.