Suppose that Rina makes a new cash deposit of $85,000 at her bank. Suppose that the bank is required only to keep new cash reserves equal to 25%. Then the maximum amount Rina's deposit will money supply is $ increase the decrease Which of the following assumptions must hold to ensure that the money creation process initiated by Rina's deposit reaches its potential? Check all that apply. Some borrowers cash the newly acquired funds. At least one bank in the banking system is conservative enough to keep some of its newly acquired cash deposits in its vault. All borrowers quickly spend all of their newly acquired funds. All banks in the banking system lend all of their excess reserves.
Suppose that Rina makes a new cash deposit of $85,000 at her bank. Suppose that the bank is required only to keep new cash reserves equal to 25%. Then the maximum amount Rina's deposit will money supply is $ increase the decrease Which of the following assumptions must hold to ensure that the money creation process initiated by Rina's deposit reaches its potential? Check all that apply. Some borrowers cash the newly acquired funds. At least one bank in the banking system is conservative enough to keep some of its newly acquired cash deposits in its vault. All borrowers quickly spend all of their newly acquired funds. All banks in the banking system lend all of their excess reserves.
Chapter12: Money And Banking
Section: Chapter Questions
Problem 13E
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Transcribed Image Text:Suppose that Rina makes a new cash deposit of $85,000 at her bank.
Suppose that the bank is required only to keep new cash reserves equal to 25%. Then the maximum amount Rina's deposit will
money supply is $
increase the
decrease
Which of the following assumptions must hold to ensure that the money creation process initiated by Rina's deposit reaches its potential? Check all
that apply.
Some borrowers cash the newly acquired funds.
At least one bank in the banking system is conservative enough to keep some of its newly acquired cash deposits in its vault.
All borrowers quickly spend all of their newly acquired funds.
All banks in the banking system lend all of their excess reserves.
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