If banks are required to hold 20% of all deposits as reserve, and an additional 5% is retained as a hedge against falling short of reserves, then a $300,000 increase in deposits will result in:
A) a $1.5 million increase in deposits.
B) a $1.2 million increase in deposits.
C) a $900,000 increase in deposits.
D) a $120,000 increase in deposits.
E) a $60,000 increase in deposits
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If the Federal Reserve requires that banks retain 20% of all deposits as reserves, and an additional 5% is also retained. ...
Solution Summary
An increased amount of money supply problem is featured.
... What amount of checkable deposits can be supported by $10 ... Required reserves may be held in the form of cash in ... vault (ie, vault cash) or as a deposit at the ...
...Reserve System member banks must hold in cash or on deposit with the Federal Reserve System, usually a specified percentage of their demand deposits and time ...
... a. Federal Deposit Insurance Corporation (FDIC) b. Federal Bond ... is cleared acquires reserves and deposits equal to ... vault cash and its reserves deposited at the ...
... the smaller the required-reserve ratio.( simple deposit multiplier = {ultimate change in checking deposits}/{change in bank reserves} = 1/RRR). ...
... As any single bank lends and creates deposits, it loses reserves to other banks that use them to increase their loans and, this create new deposits, till ...
