Question

Suppose that the required reserve ratio is 0.20. If a customer makes a deposit of $10 million in a bank, then the money supply could potentially

Answer 1

Answer:

$50 million

Explanation:

Reserve Ratio : they are the percentage of deposits required by the central bank that banks keep

Increase in the total value of checkable deposit is determined by the money multiplier

Money multiplier = amount deposited / reserve requirement

10 / 0.2 = 50 million