Table 141 Monetary Aggregates of the U Assume an Original Balance Sheet: Refer to Table 14

question 106

Multiple Choice

Table 14.1 Monetary Aggregates of the U.S.Financial System
$\begin{array}{|l|r|}\hline\text { Item } & \text { Amount } \\\hline \text { Cash held by public } & \text { \$250billion } \\\hline\text { Transactions deposits } & \text { \$1,000billion } \\\hline\text { Required reserves } & \text { \$150billion } \\\hline\text { Excess reserves } & \text { \$0billion } \\\hline \text { U.S. bonds held by public } & \$ 1,000 \text { billion }\\\hline \end{array}$

Assume an original balance sheet: Refer to Table 14.1.If the Fed changes the required reserve ratio to 10 percent,ceteris paribus,the lending capacity of the system would eventually

• A)Decrease by $50 billion.
• B)Increase by $50 billion.
• C)Decrease by $500 billion.
• D)Increase by $500 billion.

---

Definitions:

Corporate Form of Organization

A legal structure for a business recognized as a separate legal entity from its owners, providing limited liability protection, and able to raise capital through issuing shares.

Limited Liability

A legal structure that limits the amount of financial risk and liability to the amount a person has invested in a company.

Shareholders

Individuals or entities that own one or more shares of stock in a corporation, giving them certain rights and potential financial benefits based on the company's performance.

Corporate Form of Organization

A legal structure for a business recognized as a separate legal entity, with owners (shareholders) who have limited liability.