If Bob Withdraws $100 from His Checking Account and the Reserve

question 56

Multiple Choice

If Bob withdraws $100 from his checking account and the reserve requirement is 10 percent, then:

• A) the money supply can decrease by as much as $1000, if banks hold some excess reserves.
• B) the money supply can increase by as much as $1000, if banks hold no excess reserves.
• C) the money supply can decrease by as much as $100, if banks hold some excess reserves.
• D) the money supply can decrease by as much as $1000, if banks hold no excess reserves.