Suppose the Federal Reserve System Has a Required Reserve Ratio

question 115

Multiple Choice

Suppose the Federal Reserve System has a required reserve ratio of 0.10 and there are no excess reserves in the system.If the Open Market Committee buys $50 million of securities from the commercial banking system,the total lending capacity for the system

• A)Decreases by $50 million.
• B)Decreases by $500 million.
• C)Increases by $50 million.
• D)Increases by $500 million.

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Definitions:

Demand Uncertainty

This refers to the unpredictability of customer demand for products and services, affecting inventory, production, and distribution planning in supply chains.

Supplier's Demand

The quantity of materials or products required by a supplier from upstream suppliers to meet customer orders or production schedules.

Outsourcing

Outsourcing is the business practice of hiring a party outside a company to perform services or create goods that traditionally were performed in-house by the company's own employees.

Supply Chain Function

A specific activity or set of activities within a supply chain, such as procurement, production, distribution, or logistics, that adds value to products or services.