Assume the reserve requirement is 10%. First National Bank receives a deposit of $5,400. If there is no slippage, how much could the money supply expand? Explain and show your work.

I just want to know how would i set up the problem in this question.

Question

Assume the reserve requirement is 10%. First National Bank receives a deposit of $5,400. If there is no slippage, how much could the money supply expand? Explain and show your work. 

I just want to know how would i set up the problem in this question.

jim_thompson5910 · Answer

Not 100% sure, but I think you just set up the ratio

10/100 = 5400/x

then solve for x

10/100 = 5400/x

10x = 5400*100

10x = 540000

x = 540000/10

x = 54000

So they could release $54,000 into the money supply if they received a deposit of $5,400

anonymous · Answer

Thank you, yeah I am confuse to and am not sure my teacher want the math or just explain, that why i ask on here how to do it, it for my econ class. thank you again

jim_thompson5910 · Answer

yw, I would double check with another econ student since econ isn't my best strength

anonymous · Answer

thanks is there econ on here?

jim_thompson5910 · Answer

yeah i think so, look in the "find more subjects tab"

or you might find someone in econ in the math section, but idk

dwelsher · Answer

4860?