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How much will this deposit change the total quantity

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Reference no: EM133439444

Question: Suppose that we exist in a banking system with a mandated reserve ratio of 12%. Suppose that the banks in this system have no capital themselves ($0) but do still have deposits. Suppose to begin that there is no cash drain (0%) to begin with.

Suppose that there is a new deposit into a bank of 100 dollars. How much will this deposit change the total quantity of deposits in this banking system?

If the total banking system has $8,000 in deposits across the whole system, then what must have been the initial deposit into this banking system to generate these $8,000 in total deposits?

Reference no: EM133439444

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