If Reserves Increase by $4 Million and the Required Reserve

question 100

Multiple Choice

If reserves increase by $4 million and the required reserve ratio is 8%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

• A)$3.2 million
• B)$3.7 million
• C)$5 million
• D)$50 million

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Definitions:

Companion Cells

Plant cells that aid in the transport and regulation of nutrients within the phloem.

Pits

Small depressions or cavities on a surface, often used to describe features in plant or geological structures.

Carry Water

To transport or convey water from one place to another, often vital for irrigation or supplying drinking water.

Inorganic

Refers to chemical substances that are not made up of carbon-hydrogen bonds, typically including minerals, metals, and salts.