Answer:
Required reserves = Deposit * reserve ratio
= 1,000 * 10%
= $100
Excess reserves = Deposit - Required reserves
= 1,000 - 100
= $900
Assets Liabilities
Reserves Deposits $1,000
Required $100
Excess $900
Total assets $1,000 Total liabilities $1,000
b. Potential total deposit creation:
= Excess reserves / Reserve ratio
= 900 / 10%
= $9,000
