With a required reserve ratio of 20 percent,an increase in reserves of $10,000 could lead to a maximum increase in checking account deposits in the entire banking system of

Question

Quizplus · Accepted Answer

The maximum increase in checking account deposits can be calculated using the money multiplier formula:
Money multiplier = 1/reserve requirement ratio
Money multiplier = 1/0.20 = 5
The maximum increase in checking account deposits = Money multiplier x increase in reserves
= 5 x $10,000
= $50,000
Therefore, the best choice is C.

With a Required Reserve Ratio of 20 Percent,an Increase in Reserves