If chartered banks have a deserved reserve ratio of 100 percent of their deposits,a $1000 deposit in a chequing account would lead to a $100 000 increase in the money supply.

Question

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If the reserve ratio is 100 percent, it means that the bank is holding on to all of the deposits and not lending any out. Therefore, the money supply would not increase and the $1000 deposit would not lead to a $100 000 increase in the money supply.

If Chartered Banks Have a Deserved Reserve Ratio of 100