Assume banks always lend as much as they are allowed to by law, and assume the...

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Assume banks always lend as much as they are allowed to by law, and assume the required reserve ratio is 10%. John deposits $

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Answer 1

Answer #1

	Amount Deposited	Change in Excess reserves	Change in Required reserves
Bank 1	10000	9000	1000
Bank 2	9000	8100	900

Excess reserves = cash deposited - required reserves

Required reserves = 10% x cash deposited

(Amount deposited in bank 2 = excess reserves with bank 1)

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Answer 2

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