Question

Imagine that Kristy deposits​ $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is​ 20%. Refer to the scenario above. As a result of​ Kristy's deposit, checking account deposits in the banking system as a whole​ (including the original​ deposit) could eventually increase up to a maximum of

Answer 1

Answer: $50,000

Explanation:

Deposit = $10,000

Required reserve ratio (RR) = 20%

HERE, the bank deposit reserve = $10,000

Maximum checking account deposit :

(1 ÷ required reserve ratio) × deposit reserve

(1 ÷ 0.2) × $10,000

5 × $10,000 = $50,000

Therefore, checking account deposits in the banking system as a whole​ (including the original​ deposit) could eventually increase up to a maximum of $50,000