Homework Answers
Ans: Loans increased by $90. Money supply increases by $90.
Explanation:
When a customer deposits $100,
Required reserve = $100 * 0.10 = $10
Excess reserve = $100 - $10 = $90
Bank makes excess reserve to zero means, the bank increases it's loan by amount of excess reserve, i.e., $90.
The money supply also increases by $90 in day 3.
Thus, option [E] is correct answer.
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