Assume the reserve requirement is 10% and no excess reserves are held. If an initial cash...
Assume the reserve requirement is 10% and no excess reserves are held. If an initial cash deposit of $10,000 is made, the money supply has the potential to increase by:
| A. |
$90,000. |
|
| B. |
$110,000. |
|
| C. |
$100,000. |
|
| D. |
$11,000. |
Homework Answers
Multiplier = 1/r
= 1/0.1 = 10
The money supply would increase by:
= 10000*10
= 100000
option(C)
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