If banks choose to operate with a 5 per cent liquidity


If banks choose to operate with a 5 per cent liquidity ratio and receive an extra £100 million of cash deposits:

(a) What is the size of the deposits multiplier?

(b) How much will total deposits have expanded after the multiplier has worked through?

(c) How much will total credit have expanded?

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Business Management: If banks choose to operate with a 5 per cent liquidity
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