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Scenario: Money Creation
The reserve requirement is 20%. Leroy receives $1,000 as a graduation present and deposits the money in his checking account. The bank does NOT want to hold excess reserves.
-(Scenario: Money Creation) Look at the scenario Money Creation. By how much did the monetary base change?

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The monetary base did not change because the $1,000 was already part of the monetary base before it was deposited. Depositing the money into a checking account does not alter the total amount of currency in circulation or reserves in the banking system.

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