Question

Suppose the required reserve ratio is 15%. A $10 million deposit will, at most, allow an expansion of the money supply to $250 million. $150 million. $147.5 million. $66.7 million.

Answer 1

$66.7 million

Step-by-step explanation:

Calculation to determine expansion of the money supply

Using this formula

Money supply expansion=Deposit/Required reserve ratio

Let plug in the formula

Money supply expansion=$10 million/.15

Money supply expansion=$66.66 million

Money supply expansion=$66.7 million (Approximately)

Therefore A $10 million deposit will, at most, allow an expansion of the money supply to $66.7 million