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Assume that Jill deposits $20,000 in cash into her checking account at Welcome National Bank and the central bank has set a required reserve ratio of 10%.

describe the immediate effect of her deposit on the M1 measure of the money supply.
If Welcome National Bank holds an additional 10% of her deposit in reserves, find out the following:
the maximum amount the bank will loan out
the maximum increase in the money supply as a result of this transaction

(find out means show your work on the AP exam.)

describe the impact of Ela's deposit on real interest rates.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M939989

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