How much will bank b keep as required reserves at a minimum

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Reference no: EM13218533

Consider a bank that receives an initial deposit of $1,000 and loans out the maximum from this that it can. This in turn is deposited into a second bank (which may technically be itself, but that doesn't change anything), which then loans out the maximum it can, which is deposited in a third bank, and so forth. Assume the reserve requirement is 10%. 1. Under these assumptions, if a new checkable deposit of $1,000 is made in Bank A, a. how much will Bank A keep on hand in the form of required reserves, at a minimum? b. how much will Bank A lend out, at a maximum? (In other words, what amount of the deposit will constitute excess reserves?) c. how much will be deposited in Bank B, at a maximum? d. how much will Bank B keep as required reserves, at a minimum? e. how much will Bank B lend out, at a maximum? f. how much will be re-deposited in Bank C, at a maximum?

Reference no: EM13218533

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