If people never withdraw cash from banks and there are no required reserves, how much money can the banking system potentially create for a given amount of new deposits?
A. None.
B. The same amount as the new deposits.
C. An infinite amount of money.
D. The amount of new deposits multiplied by the reserve ratio.
Answer: C
You might also like to view...
To determine how much of a good to produce to achieve allocative efficiency, we
A) construct a production possibilities frontier and choose the midpoint. B) construct a production possibilities frontier and choose any point on it. C) must produce on the PPF and at the point where the marginal benefit and marginal cost of the good are equal. D) must produce on the PPF and at the point where the marginal benefit exceeds by any amount the marginal cost of the good. E) must produce on the PPF and at the point where the marginal benefit exceeds by as much as possible the marginal cost of the good.
Commitments to make or receive payments in the future are made easier by money's function as a _____
a. unit of account b. store of value c. medium of exchange d. form of barter e. commodity