If banks faced a 100 percent reserve requirement, a decrease in banking reserves of $4 million would:
If banks faced a 100 percent reserve requirement, a decrease in banking reserves of $4 million would:
A. increase the money supply by $4 million.
B. increase the money supply by $400 million.
C. decrease the money supply by $4 million.
D. decrease the money supply by $400 million.
E do none of the above.
Homework Answers
34.
Correct Answer:
A
Since reserve requirement=100%
Then, multiplier= 1/1=1
So, money supply will only increase by $4 million.
Add Answer to:
If banks faced a 100 percent reserve requirement, a decrease in banking reserves of $4 million would:
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