You have just inherited $100,000 from your rich uncle Sam. Being the conservative sort, you rush to your local bank and deposit the entire windfall....

You have just inherited $100,000 from your rich uncle Sam. Being the conservative sort, you rush to your local bank and deposit the entire windfall. The reserve requirement is currently 10 percent. What is the immediate impact on the balance sheet of the bank? Mention each account affected and the appropriate amount. Also, assuming your bank lends out money to the extent allowed by law, how much will the money supply grow beyond the initial $100,000 deposit?

SOLn:The bank keeps 10% of 100000 as reserves = 10000. The rest 90000 it is free to give as loansto other customers. So liabilities rise by 100000, assets grow by the reserve amount = 10000and...