Table 21-2.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 21-2.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 21-2.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 21-2.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 can be calculated using the money multiplier formula, which is 1 divided by the reserve ratio. If the reserve ratio is 0.075 (7.5%), the money multiplier is approximately 13.33. Therefore, an increase in reserves of $150 can potentially increase deposits by $150 * 13.33 = $2,000.00.