Assume That the Required Reserve Ratio Is 20

question 15

Multiple Choice

Assume that the required reserve ratio is 20%. What is the maximum increase in money supply for the banking system as a whole following a $10,000 increase in excess reserves?

• A) $5,000
• B) $10,000
• C) $40,000
• D) $50,000

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Definitions:

Falsifiable

A criterion for a theory or hypothesis that it can be proven wrong by observable data or experiment.

Correlation

A measure indicating the extent to which two or more variables fluctuate together, which can be positive, negative, or zero (no correlation).

Demand Characteristics

Cues in an experiment that suggest to participants what behavior is expected, potentially influencing the outcomes of that experiment.

Falsifiable

A principle that a hypothesis or theory must be capable of being proven false in order to be considered scientific.