Discuss about the banks and money supply expansion

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Reference no: EM133543862

Assignment:

This question is about the banks and money supply expansion. It is said to be true that if the reserve ratio is 0%, the change in the money supply will be infinitely large when a new deposit is made. Show this case to illustrate that the statement is correct. Make a money supply table and a loan computation table as done in class and in the text. Begin with no banks in the nation and assume the money supply to be $100,000. Let the initial deposit to the first bank be $60,000. Extend 4 loans and then show the final equilibrium position.

Reference no: EM133543862

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