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    deposits as reserves

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    If banks are required to hold 20% of all deposits as reserve, and an additional 5% is retained as a hedge against falling short of reserves, then a $300,000 increase in deposits will result in:

    A) a $1.5 million increase in deposits.
    B) a $1.2 million increase in deposits.
    C) a $900,000 increase in deposits.
    D) a $120,000 increase in deposits.
    E) a $60,000 increase in deposits

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    https://brainmass.com/economics/banking/deposits-as-reserves-16626

    Solution Preview

    If the Federal Reserve requires that banks retain 20% of all deposits as reserves, and an additional 5% is also retained. ...

    Solution Summary

    An increased amount of money supply problem is featured.

    $2.19