How the reserve requirement affects economic growth

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Banks fail when all depositors try to withdraw money at same time. One way to stop this problem would be to need banks to hold 100 percent of deposits on hand. Why would this not be a desirable thing to do? What would happen to the banking system? What would you expect to see happen to the cost of a checking account if banks could not make loans? What would happen to the amount of investment made by businesses? Explain your answer.

Reference no: EM1373593

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