Assume there is an economy with a single bank, and the central bank sets the reserve requirement ratio at 10%. Assume also that the only bank had no transactions (i.e., no loans, reserves, or deposits) prior to an individual who deposits $10,000 of currency with the bank. Show your work. (a) After the bank has issued the maximum amount of loans, what will be the total amount of loans, deposits, and money in the economy?

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter25: Money, Banking, And The Federal Reserve System
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  1. Assume there is an economy with a single bank, and the central bank sets the reserve requirement ratio at 10%. Assume also that the only bank had no transactions (i.e., no loans, reserves, or deposits) prior to an individual who deposits $10,000 of currency with the bank. Show your work.

(a) After the bank has issued the maximum amount of loans, what will be the total amount of loans, deposits, and money in the economy?

 

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