Assume a Simplified Banking System Subject to a 20 Per

question 59

Multiple Choice

Assume a simplified banking system subject to a 20 per cent minimum liquidity requirement. If there is an initial increase in excess reserves of $100 000, the money supply:

• A) increases $100 000.
• B) increases $500 000.
• C) increases $600 000.
• D) decreases $500 000.

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