Suppose an economy's financial system has $2,000,000 in deposits while banks in this system keep $400,000 in reserves. If the Central Bank mandates 7% reserve requirement: (21 points) a. What is the amount of loans this financial system is lending? b. What is the Money Multiplier?

Suppose an economy's financial system has $2,000,000 in deposits while banks in this system keep $400,000 in reserves. If the Central Bank mandates 7% reserve requirement: (21 points) a. What is the amount of loans this financial system is lending? b. What is the Money Multiplier?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter12: Money And Banking

Section: Chapter Questions

Problem 13E

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Question

Suppose an economy's financial system has $2,000,000 in deposits while banks in this
system keep $400,000 in reserves. If the Central Bank mandates 7% reserve requirement:
(21 points)
a. What is the amount of loans this financial system is lending?
b. What is the Money Multiplier?

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