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QUESTION
Suppose a commercial banking system has $100 000 of outstanding demand deposits and actual reserves of $35 000.
Suppose a commercial banking system has $100 000 of outstanding demand deposits and actual reserves of $35 000. If the reserve ratio is 20%, the banking system can expand the supply of money by a maximum amount of:
A.
$122 000.
B.
$175 000.
C.
$300 000.
D.
$75 000.
Explain your answer.
