The government of Eastlandia uses measures of monetary aggregates similar to those used by the United...

The government of Eastlandia uses measures of monetary aggregates similar to those used by the United States, and the central bank of Eastlandia imposes a required reserve ratio of 10%. Given the following information, answer the questions below. Bank deposits at the central bank = $200 million Currency held by public = $150 million Currency in bank vaults = $100 million Checkable bank deposits = $500 million Traveler's checks = $10 million Can the commercial banks increase checkable bank deposits? If yes, by how much can checkable bank deposits increase?

Commercial banks can increase deposits by an additional $3,000 million.

Commercial banks can increase deposits by an additional $2,500 million.

Since the commercial banks are not holding excess reserves, they cannot increase deposits.

Expert Solution

Rahul Sunny answered 2 years ago

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