The people of Sylvania now hold $5 million.
What happens if banks overspend?
As mentioned above, the bank that manages the overdue investment in such an area will want to lend those deposits at a reasonable interest rate, and these additional loans will reduce the short-term interest rate.
Why are banks not holding 100% of their money?
Banks have a lower incentive to keep their savings because cash does not receive a refund and may lose value over time due to inflation. Therefore, banks often reduce their excess savings, lending money to customers rather than holding it in their downtime.
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