Question
A bank (with no excess reserve) receives $175 million from the Federal Reserve. Use the model of multiple deposit creation with an assumption that only
A bank (with no excess reserve) receives $175 million from the Federal Reserve. Use the model of multiple deposit creation with an assumption that only 3 banks (including the one which gets funds from the Federal Reserve) will make full loans upto their excess reserves. The fourth bank decides to hold on to its excess reserve and does not make any loans. If the reserve requirement is 25%, calculate the maximum credit creation.
| $479 million | ||
| $175 million | ||
| $304 million | ||
| $558 million |
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Real Estate Finance
Authors: Walt Huber, Levin P. Messick
5th Edition
0916772438, 9780916772437
