Suppose the Banking System Has $100,000 in Outstanding Deposits and Actual

question 110

Multiple Choice

Suppose the banking system has $100,000 in outstanding deposits and actual reserves of $35,000. If the required reserve ratio is 25 percent, the maximum amount the banking system can now add to the money supply is:

• A)$10,000.
• B)$25,000.
• C)$40,000.
• D)$50,000.

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Definitions:

Constraints

Limitations or restrictions that affect the planning, process, or outcome of a project or operation.

Optimum

The most favorable condition or level for growth, reproduction, or efficiency.

Minimize

The act of making something as small or as insignificant as possible.

Optimum

The condition or degree of an outcome that is most favorable or efficient for a specific purpose.