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    If banks hold a 30 percent reserve ratio, an initial increase in bank reserves of $30 will lead to an eventual:

    A) increase in the money supply of $180.
    B) increase in the money supply of $90.
    C) increase in the money supply of $100.
    D) increase in loans of $100.
    E) increase in loans of $90.

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    Solution Preview

    This is a deposit multiplier question:
    Deposit multiplier = 1 / Reserve ...

    Solution Summary

    A deposit multiplier question is solved.