Answered

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If the federal reserve decreases the reserve rate from 10% to 80% how does this affect the amount of money that would result because a fractional reserve banking from an initial deposit into a bank of $40,000

Sagot :

fichoh

Answer:

100,000

Step-by-step explanation:

Given :

Initial deposit = 40000

Amount of money = Initial deposit / Reserve rate

When reserve rate = 10% = 0.1

Amount of money = 40000 / 0.1 = 400,000

When reserve rate = 8% = 0.08

Amount of money = 40000 / 0.08 = 500,000

Difference = 500,000 - 400,000 = 100,000

Amount of money will increase by 100,000

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