1. Suppose that a bank’s customer deposits $20,000 in her checking account. The required reserve ratio is 0.125. What are the required reserves on the new deposit? What is the largest loan that the bank can make on the basis of the new deposit? What is the maximum the banking

1. Suppose that a bank’s customer deposits $20,000 in her checking account. The required reserve ratio is 0.125. What are the required reserves on the new deposit? What is the largest loan that the bank can make on the basis of the new deposit? What is the maximum the banking

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Suppose that a bank’s customer deposits $20,000 in her checking account. The required
reserve ratio is 0.125. What are the required reserves on the new deposit? What is the largest
loan that the bank can make on the basis of the new deposit? What is the maximum the banking
system can increase demand deposits as a result of this deposit?
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