Initially a bank has a minimum reserve requirement of 10 percent and no excess reserves.If $10,000 is deposited in the bank,then ceteris paribus:

Question

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With a minimum reserve requirement of 10%, the bank will be required to keep $1,000 (10% of $10,000) as reserves and can loan out the remaining $9,000. As there are no excess reserves initially, the increase in deposits does not change the amount of required reserves. Therefore, the bank can increase its loans by $9,000.

Initially a Bank Has a Minimum Reserve Requirement of 10