Order the rounds of credit creation

Exercise and reference answers

Steps

1. A customer deposits 100 with the bank
2. The bank keeps 20 as its required reserve
3. The bank lends the remaining 80
4. That 80 comes back as a fresh deposit
5. The bank keeps a reserve on the larger deposit
6. Lending repeats until deposits reach 500

Instructions

Tap the steps in the order a bank creates credit from one deposit.

Explanation