If the target reserve ratio in the banking system is 1%,there is no cash drain,and there are no excess reserves,a new deposit of $1 will lead to an expansion of the money supply of

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The correct answer is E) $100.00. This is because with a reserve ratio of 1%, banks are required to hold only 1% of deposits as reserves and can lend out 99% of any new deposits. This process of lending and redepositing can theoretically continue until the initial deposit of $1 has expanded the money supply by $100, as each dollar is lent out and redeposited, creating a multiplier effect. The formula for the maximum possible expansion of the money supply is 1/reserve ratio, which in this case is 1/0.01 = 100.

If the Target Reserve Ratio in the Banking System Is