Suppose That a Banking System Has $10,000,000 in Demand Deposits

question 5

Multiple Choice

Suppose that a banking system has $10,000,000 in demand deposits and actual reserves of $1,200,000.If the target reserve ratio for all banks is 10 percent,what is the maximum possible expansion of the money supply?

• A)$2,200,000.
• B)$115 000.
• C)$200,000.
• D)$12,000,000.
• E)$2,000,000.

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Definitions:

Splined

Describing a type of connection or shaft that uses ridges or teeth to transfer torque between components, ensuring alignment and resistance to slippage.

ATF Level

The measure of Automatic Transmission Fluid within a vehicle’s transmission, indicating whether it has sufficient fluid for operation.

Operating Temperature

The range of temperature within which machinery or a system is designed to work efficiently without overheating or freezing.

Gear Ratio

The difference between input speed and output speed created by a gear train in a transmission.