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Reserve ratio of country alpha

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Reference no: EM133377455

Suppose the reserve ratio of country Alpha is 10%.

1. Show four rounds of new loan and deposit creation, if an initial deposit of $600 is made in the banking system  (consider this $600 as deposit 1). Clearly indicate the amount of loans, reserves and new deposits in each step.

2. How much will the total money supply of the country change due to this initial deposit (hint: use the money multiplier)?

 

Reference no: EM133377455

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