Suppose the Required Reserve Ratio Is 10

question 26

Multiple Choice

Suppose the required reserve ratio is 10%. Mr. Normal uses his ATM card to withdraw $1,000 from this checking account in California National Bank. This action has

• A) increased the M1 measure of money supply by $1,000.
• B) reduced the bank's required reserves by $1,000.
• C) increased the M2 measure of money supply by $1,000.
• D) not changed the M1 or M2 measures of money supply.

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Definitions:

Word Fluency

The ability to rapidly retrieve words from memory, often tested by asking individuals to produce as many words as possible from a category in a limited time.

Fluid Intelligence

The aspect of intelligence involved in the ability to think abstractly, reason quickly, and solve problems in novel situations, independent of acquired knowledge.

Quick Reasoning

The ability to think and form judgments rapidly and efficiently.

Correlational Research

A type of non-experimental research method used to measure the extent to which two variables are related, without implying causation.