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:

Question

Quizplus · Accepted Answer

If banks were required to keep 100 percent of checkable deposits as reserves, then the entire value of a new reserve injection by the Fed would be available for lending, which would increase the money supply by an equal amount (i.e. a $1 injection would lead to a $1 increase in the money supply). Therefore, the correct answer is A.

If Each Bank in the United States Had to Keep