In exchange for his many years of hard work and devotion, National Corp Inc. gives Dave...

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In exchange for his many years of hard work and devotion, National Corp Inc. gives Dave $100,000 in T-bonds. Dave sells these bonds to the Fed, and the Fed deposits the money in Dave's bank account. A bank's actual reserve ratio is the percentage of total deposits a bank actually holds on to. It is made up of the percentage they are required to hold on to, known as the required reserve ratio, plus any extra they choose to hold on to. Suppose Dave's bank has an actual reserve ratio of 12%, and his bank makes a loan to Darlene based on the funds from Dave's deposit. How much does the money supply increase as a result of this second step? In exchange for his many years of hard work and devotion, National Corp Inc. gives Dave $100,000 in T-bonds. Dave sells these bonds to the Fed, and the Fed deposits the money in Dave's bank account. A bank's actual reserve ratio is the percentage of total deposits a bank actually holds on to. It is made up of the percentage they are required to hold on to, known as the required reserve ratio, plus any extra they choose to hold on to. Suppose Dave's bank has an actual reserve ratio of 12%, and his bank makes a loan to Darlene based on the funds from Dave's deposit. How much does the money supply increase as a result of this second step?

Answer rating: 100% (QA)

When Daves bank receives the 100000 deposit from the Fed its required to hol... View the full answer