Assume that total reserves are equal to $200 and total checkable bank deposits are equal to $1,000.

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Assume that total reserves are equal to $200 and total checkable bank deposits are equal to $1,000. Also assume that the public does not hold any currency. Now suppose that the required reserve ratio falls from 20% to 10%. Trace out how this leads to an expansion in bank deposits.

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Macroeconomics

ISBN: 9781464110375

4th Edition

Authors: Paul Krugman, Robin Wells

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