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Use the following example to answer the following questions:
Imagine that Stella deposits $25,000 in currency (which she had been storing in her closet) into her checking account at the bank.Assume that this institution has a required reserve ratio of 25 percent.
-As a result of this deposit,by how much will the bank's required reserves increase?
Inflation
A general increase in prices and fall in the purchasing value of money.
Present Value
The valuation of an expected income stream determined by discounting the future income to the present using a discount rate.
Income Stream
A regular flow of money from an investment, property, or other financial assets.
Real Interest Rate
The interest rate adjusted for inflation, reflecting the real cost of borrowing or the real yield on savings.
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