Jeremiah deposits in a bank an amount of $5000 that he had been holding at home in a jar for a long time.
a. If the banking system is 100 percent reserve, how does the money supply change?
b. If the reserve requirement is 20 percent and the bank holds no excess reserves, how does the money supply change?
c. If the reserve requirement is 20 percent and the bank holds an excess reserve of 2 percent, how does the money supply change?

Question

Quizplus · Accepted Answer

The Answer of Jeremiah deposits in a bank an amount of $5000 that he had been holding at home in a jar for a long time.
a. If the banking system is 100 percent reserve, how does the money supply change?
b. If the reserve requirement is 20 percent and the bank holds no excess reserves, how does the money supply change?
c. If the reserve requirement is 20 percent and the bank holds an excess reserve of 2 percent, how does the money supply change?

Jeremiah Deposits in a Bank an Amount of $5000 That