The monetary multiplier
Suppose that Simone makes a new cash deposit of $85,000 at her bank.
Suppose that the bank is required only to keep new cash reserves equal to 25%. Then the maximum amount Simone's deposit will the money supply is.
Which of the following assumptions must hold to ensure that the money creation process initiated by Simone's deposit reaches its potential? Check all that apply.
Some borrowers cash the newly acquired funds.
The required reserve ratio exceeds 5%.
All borrowers quickly spend all of their newly acquired funds.
All banks in the banking system lend all of their excess reserves.