Suppose Joe is digging around in his basement and he finds $1,000 hidden behind a wall. Assume that Joe takes the $1,000 and deposits it in his bank. Assume also that banks hold no excess reserves, people hold no currency, and the required reserve ratio is 5 percent.
(A) When Joe teposits the s1,000 in his bank, what happens to the balance sheet?
(B) How many loans can the bank create?
(C) Suppose Jae's bark makes aloan to Sally, and she deposits the maney in her bark. How mary loans can Sally's bank make?
(D) If banks continue to make loms, what is the total change in deposits?

Question

Suppose Joe is digging around in his basement and he finds $1,000 hidden behind a wall. Assume that Joe takes the $1,000 and deposits it in his bank. Assume also that banks hold no excess reserves, people hold no currency, and the required reserve ratio is 5 percent.
 (A) When Joe teposits the s1,000 in his bank, what happens to the balance sheet?
(B) How many loans can the bank create?
(C) Suppose Jae's bark makes aloan to Sally, and she deposits the maney in her bark. How mary loans can Sally's bank make?
(D) If banks continue to make loms, what is the total change in deposits?

Quizplus · Accepted Answer

The Answer of Suppose Joe is digging around in his basement and he finds $1,000 hidden behind a wall. Assume that Joe takes the $1,000 and deposits it in his bank. Assume also that banks hold no excess reserves, people hold no currency, and the required reserve ratio is 5 percent.
 (A) When Joe teposits the s1,000 in his bank, what happens to the balance sheet?
(B) How many loans can the bank create?
(C) Suppose Jae's bark makes aloan to Sally, and she deposits the maney in her bark. How mary loans can Sally's bank make?
(D) If banks continue to make loms, what is the total change in deposits?

Suppose Joe Is Digging Around in His Basement and He