Suppose the Banking System Does NOT Hold Excess Reserves and the Reserve

question 28

Multiple Choice

Suppose the banking system does NOT hold excess reserves and the reserve ratio is 20%. If Sam deposits $500 cash in his checking account, the banking system can increase the money supply by an additional:

• A) $5,000.
• B) $2,000.
• C) $2,500.
• D) $400.

---

Definitions:

Strict Performance

The legal requirement that contractual obligations must be fulfilled exactly as agreed, with no deviations or errors.

Deliver a Deed

The act of officially transferring ownership of real property from the grantor to the grantee by handing over the deed document.

Reasonable Time

A period which is fair and appropriate under the circumstances, considering the specific context of the situation.

Government Agency

An organization part of the government, established to perform specific functions or services.