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.