Assume that Bank One receives a primary deposit of $200,000. The bank must keep 20% against...

Question

Question

Assume that Bank One receives a primary deposit of $200,000. The bank must keep 20% against its deposits. What is the maximum deposit expansion?

Answer 1

Answer #1


	Maximum Deposit Expansion
	= Primary Deposit * (1 - % kept aside against deposits)
	= $200000 * (1 - 20%)
	= $200000 * 0.80
	= $160000

	So, answer is $160000

Answer 2

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