How Banks Create Money The State Bank of Oswald has cash reserves of $5,000, loans of $495,000,
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How Banks Create Money The State Bank of Oswald has cash reserves of $5,000, loans of $495,000, and deposits of $500,000. The bank maintains a reserve requirement of 1 percent.
a. Calculate this bank’s excess reserves.
b. The bank receives a new deposit of $100,000.
What is the largest loan the bank can make?
c. What is the maximum amount the money supply can be increased as a result of the State Bank of Oswald’s new loan?
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