If each bank in the United States had to keep 100 percent of checkable deposits as reserves,each $1 the Fed injected into new reserves could increase the money supply by as much as

Question

Quizplus · Accepted Answer

If banks are required to keep 100% of checkable deposits as reserves, they cannot lend out any portion of the deposits. Therefore, each $1 the Fed injects into reserves would only increase the money supply by $1, as no additional money is created through lending.

If Each Bank in the United States Had to Keep