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How can a bank expand the money supply if someone deposits 5000 in a demand deposit in that bank and the bank has to maintain a 5 percent reserve?
Wiki User
∙ 10y ago
the bank will have to reduce their interest rate in order to attract people to make more withdrowals and also contrac loans
Wiki User
∙ 10y ago
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What is the structure of reserve requirements?
As of October 2005, the structure of reserve requirements was 0 percent for all checkable deposits up to $7 million (the exemption), 3 percent for such deposits from above $7 million to $47.6 million (the low-reserve tranche),
What is fractional reserve banking?
Fractional-reserve banking is what keeps the banks running. They must keep a certain amount of money in reserve (usually in the form of a deposit with the central bank), so that people can withdrawal their deposits.
Which would create the most money?
the initial deposit is $6500 and the required reserve ratio is 20 percent
What is the largest liability of the federal reserve system?
It is either Federal Reserve notes or U.S. Treasury deposits/other deposits
The amounts of cash that individual banks have on hand or on deposit at the Federal Reserve Bank are known as?
Reserve
What is the structure of reserve requirements?
As of October 2005, the structure of reserve requirements was 0 percent for all checkable deposits up to $7 million (the exemption), 3 percent for such deposits from above $7 million to $47.6 million (the low-reserve tranche),
What is reserve deposit ratio?
The amount of reserves a bank has in comparison to deposits. For example, if a bank has 1 million in deposits and a reserve ratio of 20% than the bank has 200,000 in reserves. This is the money they have on hand for spontaneous withdrawls
What are the percentage of deposits that banks must set aside either in their vaults or in their federal reserve district bank?
Certifcates of deposit
What is fractional reserve banking?
Fractional-reserve banking is what keeps the banks running. They must keep a certain amount of money in reserve (usually in the form of a deposit with the central bank), so that people can withdrawal their deposits.
A man decides to deposit 8 million pennies with a reserve requirement of 20 percent how did his deposit change the lending capacity of his bank?
Eight million pennies is $80,000. The man has $64,000 after the 20 percent reserve is meet. The banks capacity is $16,000.
What is current CRR in INDIA?
Cash reserve ratio...This is stipulated % of deposits that the bank has to maintain in Cash with RBI.Current CRR =5.5%
Decrease reserve rate from 5 percent to 2.5 percent initial deposit to bank of 35000?
it increases the amount by $700,000 ap3x
What is the cash reserve ratio in India?
Cash Reserve Ratio or CRR in India is the amount of money that every bank has to deposit with the RBI per customer. Every time a customer deposits cash to the bank, the bank has to correspondingly deposit a portion of that cash to the RBI. RBI decides this percentage of money that each bank has to deposit with it.
What is cash reserve ratio or CRR?
Cash Reserve Ratio or CRR in India is the amount of money that every bank has to deposit with the RBI per customer. Every time a customer deposits cash to the bank, the bank has to correspondingly deposit a portion of that cash to the RBI. RBI decides this percentage of money that each bank has to deposit with it.
Which would create the most money?
the initial deposit is $6500 and the required reserve ratio is 20 percent
What is The percentage of deposits that a bank must retain for depositors called?
It is called Cash Reserve Ratio. It is the % of money from the amount collected from depositors that needs to be maintained as deposit with the reserve bank. The bank cannot use this money for its financial needs. For Ex: if the CRR is 5% and you deposit $1000 into your account, the bank has to deposit $50 against your name
What is the largest liability of the federal reserve system?
It is either Federal Reserve notes or U.S. Treasury deposits/other deposits
