-Refer to Table 14.1. Suppose that the current reserves in the three banks all come from one initial deposit. What is the initial deposit that is divided among the three banks that make up the market?

Question

Quizplus · Accepted Answer

Given that the question implies a fractional reserve banking system where banks hold a fraction of deposits as reserves and loan out the rest, the total reserves across all banks would equal the initial deposit in a simplified model. Without the specific details from Table 14.1, we can infer that the initial deposit is the sum of the reserves that have been distributed among the banks. The correct answer typically involves understanding the multiplier effect in banking, where an initial deposit leads to a greater total amount of deposits across the banking system due to the process of lending and redepositing. However, without the details from Table 14.1, the answer hinges on recognizing that the initial deposit is the base amount from which all other deposits and reserves are derived.