c. If every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan, by how much could the total money supply in the economy expand in response to Tracy's initial cash deposit of $500? d. If every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan and the bank main- tains a reserve ratio of 5%, by how much could the money supply expand in response to Tracy's initial cash deposit of $500?
c. If every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan, by how much could the total money supply in the economy expand in response to Tracy's initial cash deposit of $500? d. If every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan and the bank main- tains a reserve ratio of 5%, by how much could the money supply expand in response to Tracy's initial cash deposit of $500?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![c. If every time the bank makes a loan, the loan results
in a new checkable bank deposit in a different bank
equal to the amount of the loan, by how much could
the total money supply in the economy expand in
response to Tracy's initial cash deposit of $500?
d. If every time the bank makes a loan, the loan results
in a new checkable bank deposit in a different bank
equal to the amount of the loan and the bank main-
tains a reserve ratio of 5%, by how much could the
money supply expand in response to Tracy's initial
cash deposit of $500?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd3e1e09f-325e-4c36-baad-812d93481b3b%2F27cc9bff-4a9c-4cad-9657-4d2e89923434%2Fh1wyqec_processed.jpeg&w=3840&q=75)
Transcribed Image Text:c. If every time the bank makes a loan, the loan results
in a new checkable bank deposit in a different bank
equal to the amount of the loan, by how much could
the total money supply in the economy expand in
response to Tracy's initial cash deposit of $500?
d. If every time the bank makes a loan, the loan results
in a new checkable bank deposit in a different bank
equal to the amount of the loan and the bank main-
tains a reserve ratio of 5%, by how much could the
money supply expand in response to Tracy's initial
cash deposit of $500?
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