Suppose the reserve requirement is 10 percent and a person deposits $1,500 in a local bank. The local bank can now create a maximum of:

Question

Quizplus · Accepted Answer

With a 10 percent reserve requirement, the bank must keep 10% of deposits as reserves and can lend out the rest. From the $1,500 deposit, 10% is $150 (which is kept as reserves), and the remaining $1,350 can be lent out, creating additional money in the economy.

Suppose the Reserve Requirement Is 10 Percent and a Person