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Macroeconomics

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Moderate

Money Creation: Change in Deposits

MACRO-BKIVKS

Suppose the Canadian banking system received a new deposit of $\$1200$ and all commercial banks have a reserve ratio ($r$) of $12$ percent. What will be the total change in deposits assuming all banks will be fully loaned-up and that the public holds a fixed amount of cash.

Which of the following correctly states the total change in demand deposits as a result of the new deposit?

A

$\$10000$

B

$\$12000$

C

$\$100$

D

$\$8800$