KNK bank receives a deposit of GHS 1,000 and observes a cash ratio of 10%. Assuming there is no cash drain(cashless economy) and all rxcess reserves are pushed into loans. a. what is the maximum amount of money that can be pushed into loans. b. what is the total increase in money supply with the bank?

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11-08-2021
Business

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KNK bank receives a deposit of GHS 1,000 and observes a cash ratio of 10%. Assuming there is no cash drain(cashless economy) and all rxcess reserves are pushed into loans. a. what is the maximum amount of money that can be pushed into loans. b. what is the total increase in money supply with the bank?

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topeadeniran2 topeadeniran2 · Answer 1 · 2021-08-13T12:51:16+02:00

The maximum amount of money which can be created from the deposit will be GHS 1,000 and the total increase in the money supply with the bank will be GHS 1,000 too.

Money supply has to do with the total amount of money that's in circulation in a particular period of time in an economy.

A) Based on the information given, the maximum amount of money which can be created from the deposit will be GHS 1,000.

B. The total increase in the money supply with the bank will be GHS 1,000. The reason for this is because there were no additional information that was given.

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