ECONOMICS
MONEY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increases by $200.
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increases by $2800.
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decreases by $3000.
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increases by $3000.
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Detailed explanation-1: -Whenever a bank grants a loan, it creates a deposit or a liability against itself. 2. Deposits of the bank circulate as money, the creation of such deposits lead to a net increase in the money stock.
Detailed explanation-2: -$90, 000 in checkable deposit liabilities and $32, 000 in reserves. the receipts became in effect paper money. When a bank accepts a checkable deposit from a customer, its deposits will increase and its excess reserves will increase by the same amount as deposits.
Detailed explanation-3: -Therefore, to get the maximum amount of loans that can be issued, you multiply the size of the deposit by 1 minus the reserve ratio.
Detailed explanation-4: -The maximum amount by which banks can increase deposits in the entire banking system is $5 billion.