Assume the following: • Required reserve ratio of 0.15 • New deposit of $2500.00 How much...

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Assume the following: • Required reserve ratio of 0.15 • New deposit of $2500.00 How much...

Assume the following: • Required reserve ratio of 0.15 • New deposit of $2500.00 How much deposit creation will be created from this new deposit?

business accounting

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Answer 1

Answer #1

Reserve ratio = 0.15

New deposit = $2,500

Deposit multiplier = 1/Reserve ratio

= 1/0.15

= 100/15

Deposit creation = New deposit x Deposit multiplier

= 2,500 x 100/15

= $16,667 ( Round off to whole number)

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Answer 2

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