Mobin finds a $50 bill under his couch and deposits it in his bank account.How much can the money supply increase if the deposit ratio is 10 percent?

Question

Quizplus · Accepted Answer

The deposit ratio is the fraction of deposits that banks hold as reserves, so if the deposit ratio is 10%, then the bank will hold $5 and can loan out $45, increasing the money supply by $45. Therefore, the best choice is B.

Mobin Finds a $50 Bill Under His Couch and Deposits