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Assume that Jill deposits $20,000 in cash into Welcome National Bank and the central bank has set a required

reserve ratio of 10%.

a. Explain the immediate effect of her deposit on the M1 measure of the money supply.

b. If Welcome National Bank holds an additional 10% of her deposit in reserves, calculate the following:

Top Answer

a.There is no immediate effect of Jill`s deposit on the M1 measure of money supply.This is because the demand... View the full answer

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