Assuming a Simple Money Multiplier, If the Fed Increases Bank

question 103

Multiple Choice

Assuming a simple money multiplier, if the Fed increases bank reserves by $100 and the required reserve ratio is 2 percent, then the maximum increase in deposits within the banking system as a whole is

• A)$5,000.
• B)$500.
• C)$98.
• D)$2.

---

Definitions:

Determinable Amount

A specific or calculable amount often related to liabilities or costs that can be precisely identified or determined.

Income Statement

A financial report that displays a company's revenues, expenses, and profits or losses over a specific period of time.

Commissions

Fees paid to salespersons or agents for facilitating sales, based on the value or volume of those sales.

Store Rent

The cost associated with leasing or renting a physical space for retail operations, recorded as an expense.