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Why don't banks hold 100-percent reserves? How is the amount of reserves banks hold related to the amount of money the banking system creates? You
Why don't banks hold 100-percent reserves? How is the amount of reserves banks hold related to the amount of money the banking system creates?
You take $100 you had kept under your mattress and deposit it in your bank account. If this $100 stays in the banking system as reserves and if banks hold reserves equal to 10 percent of deposits, by how much does the total amount of deposits in the banking system increase? By how much does the money supply increase?
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