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Assume that $100 drops from the beak of a seagull.

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5. Assume that $100 drops from the beak of a seagull. You pick it up and immediately deposit it in your checking account. (Assume this is an economy where debit cards are used instead of cash). If the bank keeps 5% of its money in reserves;a) How much money can this bank now lend out?;b) After this initial transaction, by how much is the money in the economy changed?;c) What is the value of the money multiplier?;d) How much money will eventually be created in total from this $100?

 

Paper#26337 | Written in 18-Jul-2015

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