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Assuming a bank only keeps enough of its reserves to meet its reserve requirement, how much money is created when a bank receives a deposit from an individual of $80,000 and there is a 10% reserve requirement.

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Related questions

Ceteris paribus, the money supply becomes smaller when:

A. The Federal Reserve reduces the reserve requirement.

B. An individual deposits currency into her transactions account.

C. An individual repays the money that he borrowed from a bank.

D. A bank reduces its excess reserves to make a loan.

Suppose that banks desire to hold no excess reserves, the reserve requirement is 5 percent, and a bank receives a new deposit of $1,000. This bank

a. will increase its required reserves by $50.
b. will initially see its total reserves increase by $1,000.
c. will be able to make a new loan of $950.
d. All of the above are correct.

First Bank has total deposits of $2,000,000 and legal reserves of $220,000. a. If the reserve requirement is 10 percent, what is the maximum loan that First Bank can make, and what is the maximum increase in the money supply based on First Bank's reserve position? b. If the reserve requirement is changed to 5 percent, how much can First Bank lend, and by how much can the money supply be expanded?

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