Suppose that there are no excess reserves in the banking system and the current amount of demand deposits is $100,000. If the monetary authorities lower the required reserve ratio from 10% to 5%:
A) the amount of excess reserves in the banking system will fall.
B) the amount of excess reserves in the banking system will remain the same.
C) the money-creating potential of the banking system will decline.
D) the money-creating potential of the banking system will rise.
Correct Answer:
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