Question
Question: Is the following reasoning correct: If a person deposits $1000$1000 in the bank, suppose reserve ratio is 1010 %, that means it will create
Question:
Is the following reasoning correct:
If a person deposits $1000$1000 in the bank, suppose reserve ratio is 1010%, that means it will create total loan =$900×10=$9000=$900×10=$9000, and $9000$9000 is the total loan or investment. And we suppose MPC is 0.80.8, then spending multiplier=5,$9000×5=$45,000=5,$9000×5=$45,000, which is the GDP created by the initial $1000$1000 deposit.
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Principles of economics
Authors: N. Gregory Mankiw
6th Edition
978-0538453059, 9781435462120, 538453052, 1435462122, 978-0538453042
