The Table Given Below Records the Amount of New Deposits

question 97

Multiple Choice

The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3.
Table 12.3
$\begin{array}{l}\begin{array}{|c|c|c|c|}\hline \text { Bank } & \text { New Deposit } & \begin{array}{c}\text { Required } \\\text { Reserves }\end{array} & \text { Loans } \\\hline \text { Bank 1 } & \$ 10,000 & \$ 1,000 & \$ 9,000 \\\hline \text { Bank 2 } & \$ 9,000 & \$ 900 & \$ 8,100 \\\hline \text { Bank 3 } & \$ 8,100 & \$ 810 & \$ 7,290 \\\hline\end{array}\\\text { *Assume all excess reserves are loaned out. }\end{array}$
-Refer to Table 12.3. What is the total increase in the money supply created in the banking system as a result of the initial deposit of $10,000 in Bank 1?

• A) $10,000
• B) $27,100
• C) $100,000
• D) $90,000
• E) $20,000

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Definitions:

Accounts Payable

Money owed by a company to its creditors for goods or services that have been delivered or used, but not yet paid for.

Foreign Currency Units

Units of foreign currency that are used as a medium of exchange for international transactions or investments.

Spot Rate

The current market price at which a particular currency can be bought or sold for immediate delivery.

Forward Rate

The agreed-upon exchange rate for a currency transaction that will occur at a future date.