The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3.
Table 12.3
$\begin{array}{l}
\begin{array}{|c|c|c|c|}
\hline \text { Bank } & \text { New Deposit } & \begin{array}{c}
\text { Required } \
\text { Reserves }
\end{array} & \text { Loans } \
\hline \text { Bank 1 } & \$ 10,000 & \$ 1,000 & \$ 9,000 \
\hline \text { Bank 2 } & \$ 9,000 & \$ 900 & \$ 8,100 \
\hline \text { Bank 3 } & \$ 8,100 & \$ 810 & \$ 7,290 \
\hline
\end{array}\
\text { *Assume all excess reserves are loaned out. }
\end{array}$
-Refer to Table 12.3. If the reserve requirement changed to 8 percent, then total deposits in the economy would be equal to:

Question

The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3.
Table 12.3
 $\begin{array}{l}
\begin{array}{|c|c|c|c|}
\hline \text { Bank } & \text { New Deposit } & \begin{array}{c}
\text { Required } \
\text { Reserves }
\end{array} & \text { Loans } \
\hline \text { Bank 1 } & \$ 10,000 & \$ 1,000 & \$ 9,000 \
\hline \text { Bank 2 } & \$ 9,000 & \$ 900 & \$ 8,100 \
\hline \text { Bank 3 } & \$ 8,100 & \$ 810 & \$ 7,290 \
\hline
\end{array}\
\text { *Assume all excess reserves are loaned out. }
\end{array}$
-Refer to Table 12.3. If the reserve requirement changed to 8 percent, then total deposits in the economy would be equal to:

Quizplus · Accepted Answer

The correct answer is A because the total deposits in the economy would be $125,000. This is calculated by dividing the total required reserves by the new reserve requirement. In this case, the total required reserves are $2,710 (1,000 + 900 + 810) and the new reserve requirement is 8 percent. Therefore, the total deposits in the economy would be $2,710 / 0.08 = $125,000.

The Table Given Below Records the Amount of New Deposits