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Unformatted text preview: DD BORROWER +81,000 **Writes check COMMERCIAL BANK 3 ASSETS LIABILITIES CASH 81,000(R.R. of 8,100) DD 90,000 LOAN +72,900 DD BORROWER +72,900 ASSUME: Reserve requirement is 10% Required reserves= the amount that each bank must hold Excess reserves= any mount in excess of what must be held Total reserves= required plus excess Money expansion multiplier Coefficient of demand deposit expansion: starting deposit 100,000 to ten banks will equal to a total of 1,000,000. Thus, old money equals 100,000 and new money created =900,000...
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- Fall '11