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Danielle recently moved to the United States with $10,000 of acceptable currency that had never been in the system before. Assume Danielle deposits the money into First National Bank. If the central bank has set a required reserve ratio of 20 percent, what is the maximum amount of money First National Bank can create?

Respuesta :

Answer:

The maximum amount of money First National Bank can create is $50,000

Explanation:

The computation of the maximum amount of money is calculated by applying the formula which is shown below:

The Maximum amount of money =  Reserve amount × (1 ÷ required reserve ratio)

                                                        = $10,000 × (1 ÷ 20%)

                                                        = $10,000 × 5

                                                        = $50,000

                     

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