Question
1) MUCHO DINERO BANK ASSETS LIABILITIES Required Reserves---$10,000 Demand Deposits---$100,000 Excess Reserves----$5,000 Loans---$85,000 Luis took the $5000 & bought a used car from Robert Smith.
1) MUCHO DINERO BANK
ASSETS LIABILITIES
Required Reserves---$10,000 Demand Deposits---$100,000
Excess Reserves----$5,000
Loans---$85,000
Luis took the $5000 & bought a used car from Robert Smith. Robert Smith took the $5000 & paid for a cruise to the Bahamas. Emma Black, the tour director who arranged the trip, used half the money to pay the cruise operator & the other half was deposited in her checking account which happens to be in Mucho Dinero Bank.
1. What is the spending multiplier here?
2. How much "new money" was created?
3. After Emma makes her deposit, how much may the bank lend out assuming a 10% reserve rate?
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Reform Of The International Monetary System An Asian Perspective
Authors: Masahiro Kawai, Mario B Lamberte, Peter J Morgan
1st Edition
4431550348, 9784431550341
