In a 100-percent-reserve banking system, if a customer deposits $100 of currency into a bank, then the money supply:

A) increases by $100.

B) decreases by $100.

C) increases by more than $100.

D) remains the same.

Question

Mathematics

Antonio

29 November, 22:50

In a 100-percent-reserve banking system, if a customer deposits $100 of currency into a bank, then the money supply:

A) increases by $100.

B) decreases by $100.

C) increases by more than $100.

D) remains the same.

+2

Answers (1)

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Raul Snyder · Answer 1

Option D.

Step-by-step explanation:

The total stock of currency and other liquid instruments circulating in the economy of a country as of a particular time is known as money supply.

If the reserve requirements of banks is least then banks are able to loan more money, that will increases the overall supply of money in the economy.

In 100% reserve banking system, 100% amount of each depositor's funds would be required to keep by bank for immediate withdrawal on demand.

100% reserve banking system is also known as Full-reserve banking system.

It means, if a customer deposits $100 of currency into a bank with 100% reserve banking system, then the money supply remains the same.

Therefore, the correct option is D.

In a 100-percent-reserve banking system, if a customer deposits $100 of currency into a bank, then the money supply:A) increases by $100.B) decreases by $100.C) increases by more than $100.D) remains the same.

In a 100-percent-reserve banking system, if a customer deposits $100 of currency into a bank, then the money supply:

A) increases by $100.

B) decreases by $100.

C) increases by more than $100.

D) remains the same.