salutations. macroeconomics question. demand deposits.

redwizards

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Apr 23, 2007
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Hello. I was curious if anyone could assist me in completing my macroeconomics edification by assisting me in the logic of these problems. The queries are as follows;


Assume a required reserve ratio of .25. An increase in excess reserves of $700 million can potentially lead to a demand deposit expansion of _ ?

If the required reserve ratio is .1 and reserves initially decline by $600, demand deposits can decline by _ ?

if the required reserve ratio is .2 and reserves initially decline by $400, demand deposits can decline by _ ?

Someone digs $6,000 out of his mattress and opens a checking account. If the banking system is required to keep 25% reserve to deposit ratio, what is the ultimate increase in demand deposits consequent to his deposit?


I would appreciate any assistance.

Thanks
 
We can probably help you with the math, but you'll need to explain all the economics stuff, and provide all the necessary formulas, relations, and rules.

Thank you.

Eliz.

P.S. Welcome to FreeMathHelp! :D
 
stapel said:
We can probably help you with the math, but you'll need to explain all the economics stuff, and provide all the necessary formulas, relations, and rules.
Identifying the formula is something I've yet to accomplish. I was hoping someone was familiar with the said terms?
 
redwizards said:
Identifying the formula is something I've yet to accomplish. I was hoping someone was familiar with the said terms?
Here is a question for you: Why would you think that mathematicians would know the definitions and theorems in macroeconomics?
 
I'm sorry, but we are math tutors, not economists. If you are not familiar with the terms or formulas in your area of study and/or the class you are taking, then I'm afraid there is little hope that we could help you.

Please consider consulting with a site offering assistance with economics. A good start would be to request links to lessons, so you can start learning about the topic you are studying. Once you have some background knowledge, you may be able to figure out what your exercise means.

My best wishes to you in your studies.

Eliz.
 
redwizards said:
Someone digs $6,000 out of his mattress and opens a checking account. If the banking system is required to keep 25% reserve to deposit ratio, what is the ultimate increase in demand deposits consequent to his deposit?
Red, I've had some exposure to reserves and the likes before I retired;
but that simply makes no sense to me:
1: demand deposits and checking accounts are the same thing, since both
can be withdrawn at any time
2: a "reserve" is an amount taken (transferred) from accumulated net
earnings, as a protection (like "reserve for bad debts")
3: by 25% reserve, do you mean that an amount equal to 25% of demand
deposits must be kept in "available cash (or liquidity)", in order to be
able to properly meet the anticipated withdrawal demands?
 
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