Question

You just deposited $4,000 in cash into a saving account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 12 %, how much will your deposit increase the total value of checkable bank deposits

Answer 1

Answer:

$33,333

Explanation:

Given that,

Amount of deposits received by banks = $4,000

Reserve requirement ratio = 12%

Money multiplier:

= 1 ÷ Reserve requirement ratio

= 1 ÷ 0.12

= 8.33

Therefore, the total increase in check-able deposit is calculated as follows:

= Amount of deposits × Money multiplier

= $4,000 × 8.33

= $33,333