If $300 of New Reserves Generates $800 of New Money

question 5

Multiple Choice

If $300 of new reserves generates $800 of new money in the economy,then the reserve ratio is

• A)2.7 percent.
• B)12.5 percent.
• C)37.5 percent.
• D)40 percent.

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Definitions:

Credited

A bookkeeping record that augments liabilities or equity, or diminishes an asset or expense.

Assets

Assets are resources owned by a business or individual that have economic value and can be converted into cash or provide future benefits.

Decreased

A reduction in size, number, or amount of something from a previous level.