Assume That the Banking System Has Deposits of $10 Billion

question 47

Multiple Choice

Assume that the banking system has deposits of $10 billion and excess reserves of $1 billion at a time when the reserve ratio is 10 percent.If the reserve ratio rises to 20 percent,the banking system then has:

• A)excess reserves of $2.0 billion
• B)neither an excess nor a deficiency of reserves
• C)a deficiency of reserves of $0.5 billion
• D)excess reserves of only $0.5 billion
• E)a deficiency of reserves of $1.0 billion

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