Isabel Receives a Check for $7,000 from Kermit and Deposits

question 123

Multiple Choice

Isabel receives a check for $7,000 from Kermit and deposits it in her bank. Suppose that the reserve ratio is 10 percent. As a result of this transaction the money supply will

• A) increase by $70,000.
• B) decrease by $63,000 and then increase by $70,000.
• C) decrease by $70,000 and then increase by $63,000.
• D) not change.

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Definitions:

Customers Served

The number of individual clients or consumer accounts that a business has provided with goods or services.

Capital Costs

Expenses incurred in acquiring or upgrading physical assets such as buildings and machinery.

Labor-Intensive

Describing a process or industry that requires a large amount of labor to produce its goods or services.

Marginal Product

The additional output generated by employing one more unit of a specific input, while holding other inputs constant.