Suppose Wilma Accepts a Loan of $10,000 and Deposits the Money

question 158

Multiple Choice

Suppose Wilma accepts a loan of $10,000 and deposits the money in her checking account. If the required reserve ratio is 20 percent, and if banks loan out all of their reserves, then what is the maximum increase in the money supply after the multiplier effect has fully operated?

• A) $2,000.
• B) $20,000.
• C) $50,000.
• D) $45,000.
• E) $255,000.