Question

If the reserve ratio is 10 percent, $1,000 of additional reserves can create A. $5,000 of new money. B. $9,000 of new money. C. $10,000 of new money. D. None of the above is correct.

Answer 1

C. $10,000 of new money.

Step-by-step explanation:

The computation of the additional reserve developed is as follows;

= Additional reserve ÷ reserve ratio

= $1,000 ÷ 0.10

= $10,000

Hence, it would create $10,000 of new money

We simply applied the above formula so that the correct value could come

And, the same is to be considered

Therefore the correct option is C