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Imagine that the banking system receives additional deposits of £100 million and that all the individual banks wish to retain their current liquidity ratio of 20 per cent.
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\r\n(b) What will happen to banks’ liabilities when the money that is lent out is spent and the recipients of it deposit it in their bank accounts?
\r\n(c) How much of these latest deposits will be lent out by the banks?
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\r\n(g) If one-half of any additional liquidity is held outside the banking sector, by how much less will deposits have risen compared with (d) above?
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An economy is currently in equilibrium. The following figures refer to elements in its national income accounts.
\r\n| \r\n \r\n | \r\n\r\n £ billions \r\n | \r\n
| \r\n Consumption (total) \r\n | \r\n\r\n 60 \r\n | \r\n
| \r\n Investment \r\n | \r\n\r\n 5 \r\n | \r\n
| \r\n Government expenditure \r\n | \r\n\r\n 8 \r\n | \r\n
| \r\n Imports \r\n | \r\n\r\n 10 \r\n | \r\n
| \r\n Exports \r\n | \r\n\r\n 7 \r\n | \r\n
\r\n
(a) What is the current equilibrium level of national income?
\r\n(b) What is the level of injections?
\r\n(c) What is the level of withdrawals?
\r\n(d) Assuming that tax revenues are £7 billion, how much is the level of saving?
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\r\n(i) What is the size of this gap?
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