Suppose the required reserve ratio is 3 percent, and currency and reserves total $10 million. The maximum money supply that can be supported is:
A) $13 million.
B) $30 million.
C) $97 million.
D) $333.3 million.

Question

Quizplus · Accepted Answer

The money multiplier is 1/0.03 = 33.33. Therefore, the maximum money supply is 33.33 times the reserves, which is $333.3 million.

Suppose the Required Reserve Ratio Is 3 Percent, and Currency