If a bank has excess reserves of $3,000 and the reserve requirement is 20%, the maximum amount of potential increase in the money supply is $600.

Question

Quizplus · Accepted Answer

The maximum potential increase in the money supply is calculated by dividing the excess reserves by the reserve requirement, and then multiplying by a factor of 1. So in this case, the calculation would be (3,000 / 0.20) x 1 = $15,000. Therefore, the correct answer is B, as $600 is not the maximum potential increase in the money supply.

If a Bank Has Excess Reserves of $3,000 and the Reserve