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Suppose the reserve requirement ratio is 20 percent. Assuming no bank holds excess reserves and nobody withdraws cash, a $10,000 injection of new reserves by the Fed can create (in the entire mult-banking system), a maximum of:​

Respuesta :

Answer:

The maximum money created is $50000

Explanation:

The given reserve requirement ratio is = 20 percent

The injection of cash = $10000

So,  first, we have to find the money multiplier and then multiply with the injected amount.

Since  the reserve requirement is 20 percent  so  the money multiplier =  1/ 20 = 0.5 or 5.

The Fed can create the maximum money = 10,000 x 5 = 50,000

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