You take 100 dollar you had kept under your mattress and deposit it in your bank account. If this 100 dollar stays in the banking system as reserves and if banks hold reserves equal to 10 percent of deposits, by how much does the total amount of deposits in the banking system increase? By how much does the money supply increase?
Added by Sarah H.
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Given reserve ratio = 10% Money multiplier = 1 / Reserve ratio = 1 / 0.10 = 10 ** Show more…
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You take $100$ you had kept under your mattress and deposit it in your bank account. If this $100$ stays in the banking system as reserves and if banks hold reserves equal to 10 percent of deposits, by how much does the total amount of deposits in the banking system increase? By how much does the money supply increase?
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You take $\$ 100$ you had kept under your mattress and deposit it in your bank account. If this $\$ 100$ stays in the banking system as reserves and if banks hold reserves equal to 10 percent of deposits, by how much does the total amount of deposits in the banking system increase? By how much does the money supply increase?
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Assume that the reserve requirement is 5 percent. All other things being equal, will the money supply expand more if the Fed buys $\$$2,000 worth of bonds or if someone deposits in a bank $\$$2,000 that she had been hiding in her cookie jar? If one creates more, how much more does it create? Support your thinking.
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