Question

What would be the amount of deposits D, given that the monetary base MB $750 billion, the required reserve rate (r) -0.1, the excess reserve rate (ERID) 0.005, and non-bank currency to deposits (CID) equaled 1.2?

Answer 1

$574.71 billion.

Step-by-step explanation:

The formula for calculating amount of deposits is as follows:

`D= (1)/((C/D)+rr+(ER/D))* MB`

where,

D = Deposits

rr = required reserve rate

ER/D = excess reserve rate

C/D = non-bank currency to deposits

`D= (1)/((1.2)+0.1+(0.005))* 750`

D = 574.712644

D = 574.71

Therefore, the amount of deposits is $574.71 billion.