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Suppose you have $12,000 in your checking account. You withdraw $500 cash from your account and hide it under your pillow for future use. If the required reserve ratio is 10%, then what will be the maximum impact on money supply today as a result of your action

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abiolataiwo2015

The maximum impact on money supply today as a result of your action is: Money supply will decrease by $4,500.

Required reserve= 10% × $12,000

Required reserve= $1,200

Loan= Total deposit - Required reserves

Loan= $12,000 - $1,200

Loan= $10,800

Money supply =1/.10×$10,800

Money supply=$108,000

Money supply before withdrawal is $108,000.

After withdrawal of $500:

Deposit= $12,000 - $500

Deposit= $11,500

Required reserve= 10% × $11,500

Required reserve=$1,150

Loan= Total deposit - Required reserves

Loan=$11,500 - $1,150

Loan= $10,350

Money supply=1/.10×$10,350

Money supply=$103,500

Decrease in money supply:

Decrease in money supply= $108,000 - $103,500

Decrease in money supply= $4,500

Inconclusion the maximum impact on money supply today as a result of your action is: Money supply will decrease by $4,500.

Learn more about money supply here:https://brainly.com/question/1099440

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