Suppose Joe Is Digging Around in His Basement and He

question 20

Essay

Suppose Joe is digging around in his basement and he finds $1,000 hidden behind a wall.Assume that Joe takes the $1,000 and deposits it in his bank.Assume also that banks hold no excess reserves,people hold no currency,and the required reserve ratio is 5 percent.
(A)When Joe deposits the $1,000 in his bank,what happens to the balance sheet?
(B)How many loans can the bank create?
(C)Suppose Joe's bank makes a loan to Sally,and she deposits the money in her bank.How many loans can Sally's bank make?
(D)If banks continue to make loans,what is the total change in deposits?

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Definitions:

Erikson

An influential psychologist known for his theory of psychosocial development, which outlines eight stages that individuals pass through over their lifetime.

New Identity

The process of developing a new sense of self or persona, often after significant life changes or personal development.

Erikson

Erikson refers to Erik H. Erikson, a developmental psychologist known for his theory on the psychosocial development of human beings.

Identity Crisis

A phase characterized by doubt and perplexity, during which an individual feels unstable about their sense of self, often triggered by shifts in their societal roles or life goals.