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Assume Company X deposits $100,000 in cash in commercial Bank A.If no excess reserves exist at the time this deposit is made and the reserve ratio is 20 percent,Bank A can increase the money supply by a maximum of:


A) $50,000.
B) $180,000.
C) $80,000.
D) $500,000.

E) A) and B)
F) All of the above

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Commercial banks increase the supply of money when they purchase either personal IOUs or government bonds from businesses and households.

A) True
B) False

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If the reserve ratio is 100 percent,the value of the monetary multiplier is:


A) 0.
B) 1.
C) 10.
D) 100.

E) A) and C)
F) All of the above

Correct Answer

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