What amount will total lendable deposits in banking system

Reference no: EM13186346

Joe has never trusted banks and always kept his money in cash. Joe pulls out his money jar, discovers that it has $20,000 in it, and decides it is unsafe to keep that much cash. Joe stops at the Local National Bank the following day, opens a checking account, and deposits the $20,000.

Assume that all banks in the banking system have a 10% reserve requirement. Further, assume that all banks in the banking system are fully loaned up both before and after Joe makes his deposit. Based on the Multiple Expansion of Bank Deposits concept, answer the following:

1. By what amount will total lendable deposits in the banking system increase after the initial deposit?
2. By what amount will new loans in the banking system increase given a monetary multiplier of 10 ( 1/.1)?
3. By what amount will reserves in the banking system increase after the initial deposit?

In addition, consider any factors that are not included in your calculations and might affect the amount of expansion if they were considered.

Reference no: EM13186346

Questions Cloud

State butanol and the resulting solution is analyzed : What observed rotation is expected when a 1.02 M solution of (R)-2-butanol is mixed with an equal volume of a 0.510 M solution of racemic 2-butanol, and the resulting solution is analyzed

Deist faith embraced : The Deist faith embraced all of the following except

State a two-component mixture containing octene : A two-component mixture containing 1-octene and 1,4-dimethylbenzene gave only one spot with an Rf value of 0.95. The solvent used was acetone.

Explain jurisdiction to create and enforce criminal law : Identify and explain jurisdiction to create and enforce criminal law. Discuss the adversarial system and identify and discuss standards of proof in criminal cases.

What amount will total lendable deposits in banking system : Joe has never trusted banks and always kept his money in cash. Joe pulls out his money jar, discovers that it has $20,000 in it, and decides it is unsafe to keep that much cash. Joe stops at the Local National Bank the following day, opens a check..

Consider the entrepreneurial school : Consider the entrepreneurial school: Strategy formation as a visionary process. How should Pam proceed as a visionary leader, given the fragmented structure of the shareholders?

State what was the highest alcohol density : Two students reported a plus/minus 6.0% error. What was the highest alcohol density reported and what was the lowest alcohol density reported by the two students?

Explain poor economic performance of region from civil war : by Richard Easterlin, the level of per capita income achieved in the South after the Civil War remained considerably below that in the rest of the nation as late as 1930. Evaluate the hypotheses that have been suggested to explain the poor econo..

State methyl orange is made by diazotizing the sodium salt : Methyl orange is made by diazotizing the sodium salt of sulfanilic acid (p-aminobenzenesulfonic acid) followed by coupling with N,N-dimethyl aniline. Write equations for these reactions,giving the structure of methyl orange.

User Account

All Pages