If the reserve ratio for all banks is 5 percent,then $2,500 of additional reserves can create up to

Name: If the reserve ratio for all banks is 5 percent,then $2,500 of additional reserves can create up to
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Question

Quizplus · Accepted Answer

The formula for calculating the maximum potential money creation is:
Maximum Money Creation = (Additional Reserves / Reserve Requirement)
Plugging in the given values, we get:
Maximum Money Creation = (2,500 / 0.05) = $50,000
Therefore, the correct answer is B, $50,000 of new money.

If the Reserve Ratio for All Banks Is 5 Percent,then