The money supply of Hooba is $10,000 in a 100-percent-reserve banking system.If Hooba decreases the reserve requirement to 10 percent,the money supply could increase by no more than $9,000.

Question

Quizplus · Accepted Answer

If the reserve requirement is decreased to 10 percent, the maximum increase in the money supply would be limited to $1,000 ($10,000 x 0.10). Therefore, the statement that the money supply could increase by no more than $9,000 is false.

The Money Supply of Hooba Is $10,000 in a 100-Percent-Reserve