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Homework answers / question archive / 1) Suppose that a monopoly bank faces an upward sloping supply curve of deposits R(D) = 1 + 0
1) Suppose that a monopoly bank faces an upward sloping supply curve of deposits R(D) = 1 + 0.02D, where (D) is the quantity of deposits and R(D) is the (gross) deposit rate.
If one unit of deposits invested in loans yields a (gross) return of 10, what is the quantity of deposits the bank will raise?
2. Now suppose that there are (N) banks facing the same supply curve as in #1 and the return on one unit of investment is 10. What quantity of deposits will each bank raise?
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