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Macroeconomics

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Mrs. Jones Brings Cash to the Bank

MACRO-NYZ41J

Mrs. Jones brings \$1000 of cash into her bank, First City to deposit into her che king account. If the required reserve ratio is 10%, which of the following possible changes is correct?

A

First City's demand deposits will increase by \$10,000.

B

Demand deposits may increase by a maximum of \$9000 within the banking system.

C

Circulating cash will fall by \$1000 and demand deposits may increase by a maximum of \$10,000.

D

Cash reserves will increase by \$10,000 throughout the banking system.

E

At a maximum the money supply, over time, may increase by \$10,000.