The Process of Cumulative Expansion of Demand Deposits Assumes That

question 57

Multiple Choice

The process of cumulative expansion of demand deposits assumes that no depositor withdraws cash from the banking system.If some do,when the required reserve ratio is 25 percent and no bank keeps excess reserves,a deposit of $10,000 in newly printed money will lead to an increase in the money supply of

• A) less than $30,000.
• B) $30,000.
• C) $40,000.
• D) $50,000.
• E) $60,000.

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Definitions:

Financial Calculation

The process of crunching numbers to determine outcomes related to investments, savings, profitability, and other financial metrics.

Daily Interest

Interest amount that is calculated and accrued on a daily basis, typically used in various financial contexts to determine the amount earned or owed each day.

Sales Tax

A consumption tax imposed by the government on the sale of goods and services, typically calculated as a percentage of the purchase price.

Percentage

A rate, number, or amount in each hundred, often used to express a proportion of a whole.