How can a new deposit of $10,000 create other new deposits at other banks? Suppose the desired reserve ratio is 10 percent and there is no currency drain. What will be the new amount of deposits in the second and third rounds?
2007-04-04 13:49:04 · 2 answers · asked by Anonymous in Social Science ➔ Economics
Bank has $10,000 more than before.
They have to keep 10% reserve (1,000) so lend out the rest - $9,000.
The person they lent it to now has $9,000 more in the bank. (The lent out money is either spent and ends up back in the bank as someone Else's deposits - no currency drain)
The bank keeps 10% (900) and lends out $8,100
And this keeps repeating.
2nd round new depostis 9000+8100
3rd round 9000+8100+7290
2007-04-04 15:13:42 · answer #1 · answered by JuanB 7 · 0⤊ 0⤋
You need not post the same question three or more times. It is a waste of time and resources and makes you look desperate to have someone do your work for you.
2007-04-04 13:56:54 · answer #2 · answered by Mon-chu' 7 · 0⤊ 0⤋