(Answered) Suppose that one giant bank the humongous bank of america

Management Studies

Suppose that one giant bank, the Humongous Bank of America, held all the checking deposits of all the people, subject to a 10 percent legal reserve requirement. If reserves increased by $1 billion, could the Humongous Bank expect to lend out more than 90 percent of the reserve increase, knowing that the new deposit must come back to it? Would this change the ultimate money-supply multiplier? Explain both answers.

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