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The Hang Seng Bank takes in $1,000 deposits. (a) (3 pts) Suppose the bank keeps 100% of the deposits in reserve. Show the T-account
The Hang Seng Bank takes in $1,000 deposits. (a) (3 pts) Suppose the bank keeps 100% of the deposits in reserve. Show the T-account of Hang Seng Bank. What happens to the money supply in the economy? (b) (4 pts) Suppose the bank holds 5% of the deposits as reserves and loan out the rest of the deposits. Show the T-account of Hang Seng Bank. What happens to the money supply in the economy? (c) (3 pts) Suppose that all the banks hold 5% of deposits as reserves. What is the money multiplier? How much money can be created by the banking system with this $1,000 initial deposit?
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