In the simple deposit expansion model, if the desired reserve ratio is 10 percent and the Bank of Canada increases reserves by $100, chequable deposits can potentially expand by ________.

Question

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In the simple deposit expansion model, the maximum potential increase in chequable deposits is determined by the money multiplier, which is the reciprocal of the reserve ratio. With a 10 percent reserve ratio, the money multiplier is 1/0.10 = 10. Therefore, if the Bank of Canada increases reserves by $100, chequable deposits can potentially expand by $100 * 10 = $1000.

In the Simple Deposit Expansion Model, If the Desired Reserve