Consider the Following Information About a Banking System: New Currency

question 155

Multiple Choice

Consider the following information about a banking system: new currency deposited in the system = $40 billion, legal reserve ratio = 0.20, excess reserves prior to the currency deposit = $0. The $40 billion deposit of currency
Into checking accounts will initially create

• A) $8 billion of new checkable deposits.
• B) $10 billion of new checkable deposits.
• C) $40 billion of new checkable deposits.
• D) $200 billion of new checkable deposits.

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