Assume a Simplified Banking System Subject to a 10 Percent

question 113

Multiple Choice

Assume a simplified banking system subject to a 10 percent required reserve ratio. If there is an initial increase in excess reserves of $90,000 and all possible loans are made, the money supply:

• A) increases $90,000.
• B) increases $900,000.
• C) increases $990,000.
• D) decreases $90,000.

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