Refer to the accompanying consolidated balance sheet for the commercial banking system. assume the required reserve ratio is 10 percent. all figures are in billions. after the deposit of $10 billion of new currency, the maximum amount by which this commercial banking system can expand the supply of money by lending is

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Amiah

9 October, 09:34

Refer to the accompanying consolidated balance sheet for the commercial banking system. assume the required reserve ratio is 10 percent. all figures are in billions. after the deposit of $10 billion of new currency, the maximum amount by which this commercial banking system can expand the supply of money by lending is

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Hendrix · Answer 1

We know that the after $10 billion dollars is deposited the excess reserves will increase by $9 billion dollars. Then we have that the maximum amount by which this commercial banking system can expand the supply of money by lending is 1/.10 * $9 billion dollars or $90 billion dollars.