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Suppose the Banking System Does NOT Hold Excess Reserves and the Reserve

question 281

Multiple Choice

Suppose the banking system does NOT hold excess reserves and the reserve ratio is 20%.If Sam deposits $500 cash in his chequing account,the banking system can increase the money supply by an additional _____:


Definitions:

Quick Ratio

A measure of liquidity similar to the current ratio except for exclusion of inventories. It equals cash plus receivables divided by current liabilities.

Industry Average

A statistical measure that represents the central tendency or typical value of a set of figures in a particular industry, often used for benchmarking.

Insolvency

The state in which an individual or entity cannot meet its financial obligations as debts become due.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity of a business.

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