Principal Agent Problems in the Financial Crisis of 2007-2009
They can use the other 90% of the money to grant a loan. In other words the bank can create a loan, while only 10% of the money exists. This loan can then be used to buy goods and it will eventually end up as a deposit in a bank, which then will proceed to loan out 90% of that deposit again. This process can proceed until the limit has been ... ................
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