If the reserve ratio is 100 percent,how much will the money supply eventually increase if there is a deposit of $500 of paper money in a bank?
A) $0-
B) $500
C) $1000
D) $5000

Question

Quizplus · Accepted Answer

If the reserve ratio is 100 percent, it means that the bank has to keep all the deposits as reserves and cannot lend out any money. Therefore, the money supply does not increase at all.

If the Reserve Ratio Is 100 Percent,how Much Will the Money