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04-04-2008, 02:26 AM
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| Economics question 10pts? Assume Company X deposits $80,000 in cash in commercial bank Y. If no excess reserves exist at the time this deposit is made and the reserve ratio is 30%. Bank Y can increase the money supply by a maximum of _______.      |
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04-04-2008, 02:28 AM
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| $266,666.67. To loan out $266,666.67, the bank must have reserves of 30% of $266,666.67, which is $80,000. They get to charge interest on the $266,666.67 they loan out. |
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