Table 29-2.An economy starts with $10,000 in currency.All of this currency is deposited
into a single bank,and the bank then makes loans totaling $9,250.The
T-account of the bank is shown below.

-Refer to Table 29-2.If all banks in the economy have the same reserve ratio as this bank,then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by

Question

Table 29-2.An economy starts with $10,000 in currency.All of this currency is deposited
into a single bank,and the bank then makes loans totaling $9,250.The
T-account of the bank is shown below.
 
-Refer to Table 29-2.If all banks in the economy have the same reserve ratio as this bank,then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by

Quizplus · Accepted Answer

The potential increase in deposits is calculated using the money multiplier, which is the reciprocal of the reserve ratio. If the reserve ratio is 0.075 (7.5%), the money multiplier is 1/0.075 = 13.33. Therefore, an increase in reserves of $150 can increase deposits by $150 * 13.33 = $2,000.00.