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Suppose bank 1 receives an additional $100 of deposits. How many additional dollars of loans are created by bank 1? (b) Now, suppose the
Suppose bank 1 receives an additional $100 of deposits. How many additional dollars of loans are created by bank 1? (b) Now, suppose the loan made by bank 1 became deposits at bank 2, which will makes more loans. How many additional dollars of loans are created by bank 1 and 2 combined? (c) (Involves math not covered in class) Suppose this process goes on forever, to bank 3, bank 4, and ... bank (infinity). How many additional dollars of loans are created by this infinite chain of banks? Hint: the formula for the sum of an infinite geometric series is give below. 1+8+ + +... = Fr
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