The reserve requirement is 25%, and the banking system receives a new $1,000 deposit. The bank does not want to hold excess reserves and the public does not want to hold any currency. By how much will the Deposits of the banking system ultimately rise? Hint: this involves money multiplier. $4000 $2000 $5000 $3000

Essentials of Economics (MindTap Course List)
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ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
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The reserve requirement is 25%, and the banking system receives a new $1,000 deposit. The bank does not want to hold
excess reserves and the public does not want to hold any currency. By how much will the Deposits of the banking system
ultimately rise?
Hint: this involves money multiplier.
$4000
$2000
$5000
O $3000
Transcribed Image Text:The reserve requirement is 25%, and the banking system receives a new $1,000 deposit. The bank does not want to hold excess reserves and the public does not want to hold any currency. By how much will the Deposits of the banking system ultimately rise? Hint: this involves money multiplier. $4000 $2000 $5000 O $3000
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