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Determine the demand deposit multiplier

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Reference no: EM133185185

Question - Suppose that the NBE purchased Br. 100 million treasury bills from a dealer. Assume including the dealer holds 40% in checkable (demand) deposit, 40% in time deposit and th cash or currency. The reserve requirement of banks is 10 percent of any deposit and bank 1% of any deposit in excess reserves for precautionary purposes.

Required -

1. Determine the total demand deposit that can be created from injection of reserves by NBE.

2. Determine the demand deposit multiplier.

3. Determine the total pocket money that can be created from injection of reserves by NBE.

Reference no: EM133185185

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