Consider the U.S. banking system in 2007. Assume that the re…
Consider the U.S. banking system in 2007. Assume that the required reserve ratio is 10%, that there are no cash leakages, and that banks hold zero excess reserves. Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A. As a result, Bank A finds itself with $1,000 in excess reserves that it lends out and those funds end up in Bank B. Table 13-1 Bank Increase in Checkable Deposits New Required Reserves New Checkable Deposits Created by Extending New Loans A $0 $0 $1,000 B $1,000 — — C — $90 — D $810 — — Refer to Table 13-1. At the end of this process of money creation, what is the total amount of new checkable deposits