Read the scenario below, and then answer questions 1 and 2. Refer to this week’s readings in the text, if needed.
Scenario: Bank A has an increase in deposits (or excess reserves) of $100M and the reserve requirement is 10% with other banks not holding reserves beyond the requirement.
- How much money can Bank A create by making loans?
- How much money can the banking system as a whole create? (Show calculation).