Suppose, the current reserve ratio is 20% and the current cash-drain is zero. Currently, the banking system has cash reserves of $10 billion. If the banking system reduces its reserve ratio to 10%, while cash-drain remains zero, eventually it will lead to one of the following outcomes:
A) Excess reserves worth $10 billion.
B) Additional deposit-creation worth of $100 billion.
C) Additional deposit-creation worth of $40 billion.
D) Additional loan-creation worth $50 billion.
Correct Answer:
Verified
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