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Banks in New Transylvania have a desired reserve ratio of 10 percent and no excess reserves. The currency drain ratio is 50 percent. Then the
Banks in New Transylvania have a desired reserve ratio of 10 percent and no excess reserves. The currency drain ratio is 50 percent.
Then the central bank increases bank reserves by $1,200.
How much do the banks lend in the first round of the money creation process?
How much of the initial amount lent flows back to the banking system as new deposits?
How much of the initial amount lent does not return to the banks but is held as currency?
Banks lend $_______ in the first of the money creation process.
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