A bank receives a $1,000 deposit and the reserve ratio is 10%

a) Required reserves are a certain percentage of the Deposits of the bank which it is required to keep with itself in the form of reserves. These reserves cannot be used by the bank to extend loans and advances. It is calculated as-

Required reserves= Deposits x required reserve ratio

When the bank will receive a deposit of $1,000, the bank will keep 10% of this deposit as required reserves.

Required reserves= $1,000 x 10%

Required reserves= $1,000 x 10/100

Required reserves= $1,000 x 0.1

REQUIRED RESERVES= $100

Hence, the bank will hold $100 in required reserves. ( Answer)

b)

Money multiplier tells us that by how many times the money supply will increase as a result of an initial deposit made. It is calculated as-

MONEY MULTIPLIER= 1/RR

( Where RR is the required reserve ratio)

Money multiplier= 1/10%

MONEY MULTIPLIER= 1/(10/100)

MONEY MULTIPLIER= 1/0.1

MONEY MULTIPLIER= 10

Hence, the money multiplier is 10 ( answer)

c)

When a bank receives a deposit, a certain percentage of it's Deposits is kept as required reserves and the excess reserves are used to extend loans and advances. This excess reserves lent out again get deposited in some other bank and the same process of depositing and lending out will continue to take place until the last amount deposited is too small to make a loan. As such, the total amount of money created as a result of an initial deposit made can be calculated as-

New deposits = 1/ RR x ?D

New deposits= 1/10% x $1,000

New deposits= 1/0.1 x $1,000

new deposits= 10 x $1,000

NEW DEPOSITS= $10,000

Hence, $10,000 will be created ( answer ).