Suppose that someone deposits $10,000 into a bank. Assuming a reserve requirement ratio of 20 percent, what will be the eventual increase in checking account balances?
What will be an ideal response?
The short way to figure this out is to multiply the initial cash deposit amount by the reciprocal of the reserve ratio (the money multiplier). Therefore, the eventual increase in account balances will be $50,000.
You might also like to view...
In 2008, Zimbabwe ran out of locally produced Coca Cola and local Coke bottlers were not able to import the concentrated syrup needed to make Coke from the United States because they could not obtain U.S. dollars
A small amount of Coke was imported from South Africa, but a single bottle sold for around 15 billion Zimbabwean dollars. Zimbabwe was experiencing rapid increases in the price level, which is known as A) deflation. B) inflation. C) hyperinflation. D) stagflation.
After running a promotional campaign, the owners of a local shoe store decided to decrease the prices for the shoes sold in their store. One can imply that
a. The promotional expenditures made the demand for their shoes more elastic b. The promotional expenditures made the demand for their shoes more inelastic c. The promotional expenditures has no effect on the shoe demand elasticity d. The owners got it wrong. To cover the promotional expenses, they should have raised the prices.