Refer to the information provided in Scenario 10.1 below to answer the questions that follow.
SCENARIO 10.1: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up.
-Refer to Scenario 10.1. Based on the initial $100,000 deposit, the money supply will, at most, expand to

Question

Refer to the information provided in Scenario 10.1 below to answer the questions that follow.
SCENARIO 10.1: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up. 
-Refer to Scenario 10.1. Based on the initial $100,000 deposit, the money supply will, at most, expand to

Quizplus · Accepted Answer

Based on the information provided, the initial deposit of $100,000 results in a total increase in deposits of $500,000 ($100,000 in Bank No. 1 and a subsequent increase of $400,000 in the other banks due to the multiplier effect). Therefore, the maximum potential money supply expansion is $2 million (5 times the initial deposit).

Refer to the Information Provided in Scenario 10