Question

Joe deposits $1,200.00 in his checking account at the bank. If the Federal Reserve has a 10% ratio reserve requirement, how much money can now be created in the economy?

Answer 1

Money can be created to Joe in the economy is  $1080.00.

An financial system is the large set of inter-associated production and intake sports that resource in determining how scarce sources are allocated. In an financial system, the production and consumption of goods and services are used to satisfy the wishes of those residing and running inside it. Financial system is defined as the management of financial matters for a network, commercial enterprise or circle of relatives.

calculation:-

Amount deposited by Joe is $1,200.00

Federal reserve ratio = 10%

Amount of federal ratio = ($1200 * 10)* 100

                                       =  $120

Money can be credited in the economy = ($1,200.00 - $120)

                                                                  =  $1080.00

Hence money created in the economy is   $1080.00.

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