Question

If each bank in the United States had to keep 100 percent of checkable deposits as reserves, each $1 the Federal goverment injected into new reserves could increase the money supply by _____.

Answer 1

Answer: money supply could increase by 100

Explanation:

Reserve requirement is a regulation by the central bank or reserve bank of a country that requires commercial banks to hold a certain percentage of funds as reserves .

When US Bank keep 100% of check able deposits as reserves that means the multiplier is 100. each $1 the federal government injects could increase the money supply by 1100