If the reserve ratio is 10 percent, how much new money can $1000 of excess reserves create?
A)$100
B)$1000
C)$10 000
D)$100 000

Name: If the reserve ratio is 10 percent, how much new money can $1000 of excess reserves create? A)$100 B)$1000 C)$10 000 D)$100 000
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Question

Quizplus · Accepted Answer

If the reserve ratio is 10 percent, the simple money multiplier is 1/0.1=10. So, $1000 of excess reserves can create $10,000 of new money. Therefore, the correct answer is option C.

If the Reserve Ratio Is 10 Percent, How Much New