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yanalaym [24]
4 years ago
7

Due to the multiplier effect, what is the maximum amount That There Bank could loan out?

Social Studies
2 answers:
Furkat [3]4 years ago
8 0

Uhhh... $34.000 if I’m wrong just comment me saying REJECTED

sleet_krkn [62]4 years ago
5 0

Answer:

The maximum amount a bank can lend depends on the reserve ratio.

Explanation:

The money multiplier effect is the process that allows banks to multiply money from an initial amount of money.

<em>Imagine that John makes a deposit of $ 1,000 in a bank, if the cash ratio is 10%, the bank will have to save 10% of that $ 1,000 ($ 100) and can lend $ 900 of that money to Mary. If Mary deposits it again in the bank, the bank saves 10% of the $ 900 deposited (90 dollars) and lends the remaining $ 810 to Norman, so on in a decreasing infinite series.</em>

<u>This is because banks are only required to keep a minimum level of money in their reserves.</u> This minimum is called the reserve ratio and is determined by each central bank.

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