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Scenario: Holding Cash
Suppose that the public holds 50% of the money supply in currency and the reserve requirement is 20%. Banks hold no excess reserves. A customer deposits $6,000 in her checkable deposit.
-(Scenario: Holding Cash) Look at the scenario Holding Cash. As a result of the deposit, the bank's loans will increase by:

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The reserve requirement is 20%, so the bank must keep $1,200 (20% of $6,000) as reserves. The remaining $4,800 can be loaned out, increasing the bank's loans by that amount.

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