Consider a country where all money is currently held as cash and the money supply has...

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Consider a country where all money is currently held as cash and the money supply has a value of $6,500. A banking system is developed, and the residents of the country deposit the $6,500 of cash into the banking system and decide they no longer want to hold any cash. If the reserve ratio is equal to 20%, how much can the $6,500 increase the amount of money in the economy? The money supply in the economy will be equal to $ The banking system has the ability to create $ of new money. Consider a country where all money is currently held as cash and the money supply has a value of $6,500. A banking system is developed, and the residents of the country deposit the $6,500 of cash into the banking system and decide they no longer want to hold any cash. If the reserve ratio is equal to 20%, how much can the $6,500 increase the amount of money in the economy? The money supply in the economy will be equal to $ The banking system has the ability to create $ of new money.

Answer rating: 100% (QA)

Given that the reserve ratio is 20 it means that ban... View the full answer