Macroeconomics Impact on Business Operations

Essay specific features

 

Issue:

Business

 

Written by:

Frank H

 

Date added:

March 27, 2017

 

Level:

University

 

Grade:

B

 

No of pages / words:

6 / 1486

 

Was viewed:

6328 times

 

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Essay content:

The extra deposits also known as excess reserve can be utilized as loans in order to create additional checkable deposits (McConnell & Brue, 2004). Individual commercial banks can only lend an amount that is less than or equal to its excess reserve. The excess reserve is calculated by subtracting the required reserve from the actual reserve...
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The banking system magnifies the original excess reserve into a larger amount of newly created checkable deposit money (McConnell & Brue, 2004). This can be seen using the monetary multiplier that has a formula expressed as m as the reciprocal of the required reserve R (m =1/R). In order to determine the maximum checkable deposit creation the monetary multiplier is multiplied by the excess reserve (D = E x m) (McConnell & Brue, 2004)...
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