Suppose that we exist in a banking system with a mandated re.pdf

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Suppose that we exist in a banking system with a mandated reserve ratio of 12%. Suppose that the banks in this system have no capital themselves ($0) but do still have deposits. Suppose to begin that there is no cash drain (0%) to begin with. 11. Suppose that there is a new deposit into a bank of 100 dollars. How much will this deposit change the total quantity of deposits in this banking system? [1 point] 12. If the total banking system has $8,000 in deposits across the whole system, then what must have been the initial deposit into this banking system to generate these $8 ,000 in total deposits? [2 points] Using the initial quantity of deposits that you calculated in the previous question (Q12), answer the following final two questions: 13. If the Central Bank lowers the reserve ratio from 12% to 10%, how much would this change the quantity of deposits across the total banking system? [2 points] 14. Suppose that the reserve ratio remains at 10%. If there was also a cash drain of 10%, what would be the quantity of deposits across the total banking system? [2 points].

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