Discussion Question 15-07a.
a.
A single commercial bank can safely lend only an amount equal to its excess reserves, but the commercial banking syotem as a whole can lend by a multiple of its excess reserves becouse one bank loses reserves to other benks, but the banking system as a whole does not. one bank gains reserves, but the banking system as a whole loses these reserves. the banking system as a whole has more funds than any single commercial bavk. this is a legal restriction placed on banks, but it does not apply to the banking system as a whole.
one bank loses reserves to other benks, but the banking system as a whole does not.
one bank gains reserves, but the banking system as a whole loses these reserves.
the banking system as a whole has more funds than any single commercial bavk.
this is a legal restriction placed on banks, but it does not apply to the banking system as a whole.
b.
The monetary mutiplier is defined as
1=R, where R is the required reserve ratio.
R=1, where R is the required reserve ratio.
M, where R is the required reserve ratio.
I R, where A is the requered restrve ratio.
c.
The moresary multipler is
divectly related to the reserve ratio.
imersely related to the reserve ratio.
equal to 1 plus the required reserve ratio.
equal to 1 minus the required reserve ratig.
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