Answer to Question #145743 in Accounting for Rupali Pawar

Question

Suppose we deposit $565 worth of currency into the bank. Banks make as many loans as possible, people hold no additional currency, and the reserve ratio is 15%. As a result of the loan process, what is the value of total deposits in the banking system? Enter a whole number with no dollar sign. Round to the nearest whole number.

Answer 1

total deposit = initial deposit $\times$ money multiplier

$=565 \times 1/ reserve$ $requirement$

$=565 \times\frac{1}{0.15} = 3766.67$

$=3767$