Suppose That a Member of the Public Deposits $100 of Currency

question 19

Multiple Choice

Suppose that a member of the public deposits $100 of currency in the bank.If the reserve ratio is 5 percent,the maximum amount by which the money supply can increase is:

• A)$2000
• B)$1900
• C)$500
• D)$475
• E)$100

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Definitions:

Normal Debit Balance

Refers to the side (debit or credit) on which an account will typically report a balance, with assets and expenses usually having a normal debit balance.

Recorded By Credits

Transactions that increase liabilities, equity, or revenue, or decrease assets or expenses, reflected in the accounting records.

Increases

A rise in the value or quantity of something, such as assets, revenue, or profits.

Recorded By Debits

Transactions in accounting that increase assets or expenses and decrease liabilities, equity, and revenue, captured on the left side of an account.