Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve requirement is 5%. What is the maximum possible increase in the money supply as a result of your bank deposit? maximum increase: $ Which events could cause the increase in the money supply to be less than its potential? Banks choose to loan out all excess reserves. Some loan recipients choose to hold some cash instead of depositing all of it in banks.

Economics: Private and Public Choice (MindTap Course List)
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ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 13CQ
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Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve
requirement is 5%.
What is the maximum possible increase in the money supply as a result of your bank deposit?
maximum increase: $
Which events could cause the increase in the money supply to be less than its potential?
Banks choose to loan out all excess reserves.
Some loan recipients choose to hold some cash instead of depositing all of it in banks.
Banks decide to keep some excess reserves on hand.
All money loaned out is deposited back into the banking system.
Transcribed Image Text:Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve requirement is 5%. What is the maximum possible increase in the money supply as a result of your bank deposit? maximum increase: $ Which events could cause the increase in the money supply to be less than its potential? Banks choose to loan out all excess reserves. Some loan recipients choose to hold some cash instead of depositing all of it in banks. Banks decide to keep some excess reserves on hand. All money loaned out is deposited back into the banking system.
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