Use the Following to Answer Questions

question 463

Multiple Choice

Use the following to answer questions :
Scenario: Money Supply Changes
The reserve requirement is 10% and Jack withdraws $5,000 travel money from his checkable deposit. Assume that banks do not hold any excess reserves and that the public holds no currency, only checkable bank deposits.
-(Scenario: Money Supply Changes) Look at the scenario Money Supply Changes. By how much will the money supply contract as a result of the withdrawal?

• A)$0
• B)$5,000
• C)$45,000
• D)$50,000

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Definitions:

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