The desired reserve ratio is 10 percent.All banks have zero excess reserves.A cheque for $500,000 is deposited in Bank A,written on an account at Bank B.By how much does the money supply change if all banks make loans so that they have zero excess reserves?

Question

Quizplus · Accepted Answer

The money supply does not change because the deposit in Bank A is offset by the withdrawal from Bank B. The total reserves in the banking system remain the same, and the money supply is unchanged.

The Desired Reserve Ratio Is 10 Percent