If the reserve requirement is 1%, a $10,000 decrease in deposits means that the actual money supply will decrease by more than $1 million.

Name: If the reserve requirement is 1%, a $10,000 decrease in deposits means that the actual money supply will decrease by more than $1 million.
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Question

Quizplus · Accepted Answer

The actual money supply will decrease by $10,000 divided by the reserve requirement of 1%, which equals $1 million. Therefore, the statement is false.

If the Reserve Requirement Is 1%, a $10,000 Decrease in Deposits