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A bank has excess reserves of $1,000,000 and makes a new loan for $500,000. If the bank faces a 10% required reserve ratio, by how much will the money supply increase when the loan is made
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A bank has excess reserves of $1,000,000 and makes a new loan for $500,000. If the bank faces a 10% required reserve ratio, by how much will the money supply increase when the loan is made

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Answer:

Money supply increase=500000/10%=5000000

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