Question

In: Economics

1) a. Based on data provided by World Bank, compare the growth in supply broad money,...

1) a. Based on data provided by World Bank, compare the growth in supply broad money, Gross Domestic Product (GDP) and real interest rates for ASEAN countries for 2010 to 2018.

b. Based on the information obtained, what can be deduced about the relationship between the Growth of money supply and the economic performance of a country?

2) a.State what steps Central Bank of Malaysia has taken to making Malaysia a cashless society.

b. What variables can be used to measure “cashless society”

c. What is the advantage of having a cashless society?

d. Disadvantage of cashless society?

3)a. What does the term "fractional reserve banking" mean?

b. Why do commercial banks keep reserves in the central bank?

c. Why do commercial banks keep excess reserves?

7) In a single bank system, banks can make deposits when they receive new deposits cash. Two mathematical formulas are commonly used for computational calculations The mathematical deposit is as follows:

∆ DD = ∆ B (1 – ?? ) / (1 – x )

∆ DD = ∆ B [ 1 / ( 1 – x) ]

If a depositor puts a cash deposit of RM50,000 into it bank, assuming the statutory reserve requirement is 5% and the bank adopting the reserve 10% cash,

a. Calculate the amount of deposit created at the end of round 4, using mathematical formulas.

b. Prove that you will receive the same deposit amount at the end of round 4, by using the T account method.

c.Calculate the amount of deposit created at the end of each round, using mathematical formulas only.

Solutions

Expert Solution

Q3. Fractional reserve Banking: in this the banks only keep the hand some amount of cash deposited with them fro the banking business . the banks who had received cash in the form of deposits keeps certain percent with them and lends the rest of the deposits to other banks in order to maintain the supply in the economy.

b. the central bank has prescribed the requirement of holding certain percentage of deposits by commercial bank. the main reason behind this is to ensure that there is proper and sufficient liquidity in the banking system.

c.Commercial banks keep excess reserves because in the banking system along with deposit lending of money also takes place i. e that if one person deposits the other person take loan and this is the series of transaction that take places every minutes. moreover the demand deposit is also one of the main reason for which commercial bank keeps excess reserves.


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