Assuming that banks choose to maintain a liquidity ratio of 20 per cent and assuming that new cash deposits of £100m are made in the banking system: (a) Complete the following table which shows how credit is created. £m £mBanks receive100HoldLend2080Second round deposits rise by ____HoldLend______Third round deposits rise by ____HoldLend______Fourth round deposits rise by ____HoldLend______Fifth round deposits rise by ____HoldLend______Total deposits after five rounds

A cash number is during all|one amongst|one in every of} many closely connected ratios of economic…

Answered: Assuming that banks choose to maintain…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assuming that banks choose to maintain a liquidity ratio of 20 per cent and assuming that new cash deposits of £100m are made in the banking system:

(a) Complete the following table which shows how credit is created.

	£m		£m
Banks receive	100	Hold Lend	20 80
Second round deposits rise by	____	Hold Lend	___ ___
Third round deposits rise by	____	Hold Lend	___ ___
Fourth round deposits rise by	____	Hold Lend	___ ___
Fifth round deposits rise by	____	Hold Lend	___ ___
Total deposits after five rounds

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