Suppose That the Reserve Ratio Is 20

question 251

Multiple Choice

Suppose that the reserve ratio is 20%.If Holly deposits $1 000 of cash in her chequing account and the bank lends $600 to Freda,the money supply:

• A) remains the same.
• B) decreases by $1 000.
• C) decreases by $600.
• D) increases by $600.

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