Question
Asked Jun 11, 2019
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If the reserve ratio requirement is 7%, a $2000 deposit will increase the money supply by (roughly)

a. 12,000.

b. 15,000.

c. 20,000.

d. 28,500. 

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Expert Answer

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Increase in money supply:

Increase in money supply c...

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1 Money supplyReserve requirement - x Deposit 1 -x2,000 0.07 -28,571.42 Thus, the money supply increases by roughly S28,500.

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