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:

Open Market

A freely competitive market where any buyer or seller can participate without restrictions.

Savings Accounts

Financial accounts at banks or other financial institutions that pay interest on deposits, allowing individuals to save money over time.

Maturity Dates

The specific dates on which financial instruments such as bonds or loans are due to be fully paid off.

Money Supply

The total quantity of currency and other liquid instruments circulating in an economy at a particular time.