Economics Homework! Please Help I really dont get this part

Posted on 2014-03-11 08:14:00 in Economics by ELISE HIDALGO

Suppose that banking system’s cash reserves are $200,000, the checkable deposits are $100,000, and the reserve requirements is 20 percent. Also assume banks will loan out any excess reserves and the ratio of people’s cash to deposits is zero (no cash holdings.



If the bank receives an extra $1,000 of reserves but decides not to lend any of these reserves out. How much deposit creation takes place for the entire banking system? Explain your answer.

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