Suppose you have $10,000 in your checking account. you withdraw $500 cash from your account and hide it under your pillow for future use. if the required reserve ratio is 10%, what will be the maximum impact on money supply today as a result of your action?

a. the money supply will decrease by $4,500.

b. the money supply will decrease by $5,000.

c. the money supply will decrease by $500.

d. there will be no impact on the money supply.

Question

Business

Nick Jefferson

7 September, 06:56

Suppose you have $10,000 in your checking account. you withdraw $500 cash from your account and hide it under your pillow for future use. if the required reserve ratio is 10%, what will be the maximum impact on money supply today as a result of your action?

a. the money supply will decrease by $4,500.

b. the money supply will decrease by $5,000.

c. the money supply will decrease by $500.

d. there will be no impact on the money supply.

+3

Answers (1)

Know the Answer?

Jesus Moran · Answer 1

A, the money supply (how much currency in a country's economy at a time) is going to decrease by $4500! A required reserve ratio is basically a sort of rule that the government sets that says how much of a person's deposits must be set towards reserves.