At the start, all banks are exactly meeting the reserve ratio, with no excess reserves. If any bank acquires excess reserves, it will immediately loan out the entire amount. The borrower will pay a debt, and that debtor will deposit the entirety of the loan into another bank.
At the start, all banks are exactly meeting the reserve ratio, with no excess reserves. If any bank acquires excess reserves, it will immediately loan out the entire amount. The borrower will pay a debt, and that debtor will deposit the entirety of the loan into another bank.
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Answer:
At the start, all banks are exactly meeting the reserve ratio, with no excess reserves. If any bank acquires excess reserves, it will immediately loan out the entire amount. The borrower will pay a debt, and that debtor will deposit the entirety of the loan into another bank.
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assumption of money creation is-
At the start, all banks are exactly meeting the reserve ratio, with no excess reserves. If any bank acquires excess reserves, it will immediately loan out the entire amount. The borrower will pay a debt, and that debtor will deposit the entirety of the loan into another bank.