If Bob withdraws $100 from his checking account and the reserve requirement is 10 percent, then:

Name: If Bob withdraws $100 from his checking account and the reserve requirement is 10 percent, then:
Brand: Quizplus
Rating: 4.8 (48 reviews)

Question

Quizplus · Accepted Answer

When Bob withdraws $100, the bank's reserves decrease, reducing its ability to lend. With a 10% reserve requirement, the bank can lend out $900 of the $1000 it could have created through the money multiplier effect. Thus, the money supply can decrease by as much as $1000.

If Bob Withdraws $100 from His Checking Account and the Reserve