If the Required Ratio of Reserves to Deposits Is R,then

question 19

Multiple Choice

If the required ratio of reserves to deposits is r,then for every $1 in excess reserves,the banking system can potentially increase the money supply by

• A) r.
• B) 1 + r.
• C) 1/r.
• D) 1/(1 - r).
• E) (1 - r)/r.

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