If bank reserves are equal to $2,000, the required reserve ratio is 10 percent, and banks make as many loans as they can, what w

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If bank reserves are equal to $2,000, the required reserve ratio is 10 percent, and banks make as many loans as they can, what w

ill be the upper limit of the money supply assuming no borrower withdraws currency and leaves the loan balance in the bank after a loan is created

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1 answer:

Katyanochek1 [597] · Answer 1 · 2022-12-08T08:47:27+03:00

The upper limit on the money supply assuming borrower withdraws currency and leaves the loan balance in the bank after a loan is created is $200,000.

<h3>What is the upper limit on the money supply?</h3>

The first step is to determine the total amount of deposits in the banks.

Deposits = resereves / reserve ratio

2000 / 0.1 = $20,000

Upper limit on money supply = deposits / reserve ratio

20,000 / 0.1 = $200,000

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