a) Describe the process of the creation of money in the banking system. (2)
b) Then, work through the following numerical example: Starting at zero deposits, 200$ are newly deposited at Bank A, the only bank in country A. The reserve requirement ratio is 20%. Give the first three iterations in the process that multiplies money in the banking system. (2.5)
c) If the process plays out all the way, what is the eventual amount of money in deposits at bank A? (0.5)
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