Assume that the reserve requirements ratio is 15%. An initial injection of $150 million could result in a maximum change in the money supply of
A)$150 million.
B)$1 billion.
C)$1 million.
D)$22.5 million.

Question

Quizplus · Accepted Answer

The maximum change in the money supply can be determined using the formula:

Maximum Change in the Money Supply = Initial Injection / Reserve Requirement Ratio

Substituting the given values, we get:

Maximum Change in the Money Supply = $150 million / 0.15

Maximum Change in the Money Supply = $1 billion

Therefore, the correct answer is option B, which states that the maximum change in the money supply would be $1 billion.

Assume That the Reserve Requirements Ratio Is 15