Assume We Have a Simplified Banking System in Balance-Sheet Equilibrium

question 24

Multiple Choice

Assume we have a simplified banking system in balance-sheet equilibrium. Also assume that all banks are subject to a uniform 10 percent reserve requirement and demand deposits are the only form of money. A commercial bank receiving a new demand deposit of $100 would be able to extend new loans in the amount of:

• A) $10.
• B) $90.
• C) $100.
• D) $1,000.

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