Initially, the amount of currency was 500 and the amount of deposits was zero. The required reserve ratio is 10%. Answer questions below. 2.b. The public deposited all of 500 into a bank. This started the money creation process. 2.b.i. Choose correct words about the process. "The process stops when all of new deposited currencies are (used as reserves / loaned out)." 2.b.ii. Compared to before the public deposited the currencies, how much would be the increase in deposits? 2.b.iii. Compared to before the public deposited the currencies, how much would be the increase in money supply?
Initially, the amount of currency was 500 and the amount of deposits was zero. The required reserve ratio is 10%. Answer questions below. 2.b. The public deposited all of 500 into a bank. This started the money creation process. 2.b.i. Choose correct words about the process. "The process stops when all of new deposited currencies are (used as reserves / loaned out)." 2.b.ii. Compared to before the public deposited the currencies, how much would be the increase in deposits? 2.b.iii. Compared to before the public deposited the currencies, how much would be the increase in money supply?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
2. Initially, the amount of currency was 500 and the amount of deposits was zero. The required reserve ratio is
10%. Answer questions below.
2.b. The public deposited all of 500 into a bank. This started the money creation process.
2.b.i. Choose correct words about the process.
"The process stops when all of new deposited currencies are (used as reserves / loaned out)."
2.b.ii. Compared to before the public deposited the currencies, how much would be the increase in deposits?
2.b.iii. Compared to before the public deposited the currencies, how much would be the increase in money
supply?
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