Suppose the required reserve ratio is 20 percent. A $5 million deposit allows commercial banks to create as much as

a) $25 million.

b) $5 million.

c) $10 million.

d) $1 million.

Question

Mathematics

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17 January, 13:28

Suppose the required reserve ratio is 20 percent. A $5 million deposit allows commercial banks to create as much as

a) $25 million.

b) $5 million.

c) $10 million.

d) $1 million.

+3

Answers (1)

Know the Answer?

Audrina Perkins · Answer 1

Option D. $1 million

Step-by-step explanation:

we know that

Reserve Ratio, it is the percentage of deposits which commercial banks are required to keep as cash

Find the 20% of $5 million

20%=20/100=0.20

0.20*5,000,000=$1,000,000

so

$1 million

Suppose the required reserve ratio is 20 percent. A $5 million deposit allows commercial banks to create as much asa) $25 million.b) $5 million.c) $10 million.d) $1 million.

Suppose the required reserve ratio is 20 percent. A $5 million deposit allows commercial banks to create as much as

a) $25 million.

b) $5 million.

c) $10 million.

d) $1 million.