If the reserve requirement is 25% and $5,000 is injected into the banking system, the maximum expansion in the money supply would be:

Name: If the reserve requirement is 25% and $5,000 is injected into the banking system, the maximum expansion in the money supply would be:
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Quizplus · Accepted Answer

The money multiplier is 1 divided by the reserve requirement (1/0.25 = 4). The maximum expansion in the money supply is the initial injection multiplied by the money multiplier ($5,000 * 4 = $20,000).

If the Reserve Requirement Is 25% and $5,000 Is Injected