- Assume an Original Balance Sheet: If the Fed Changes

question 14

Multiple Choice

- Assume an original balance sheet: If the Fed changes the required reserve ratio in Table 14.2 to 15 percent,the lending capacity of the system will eventually

• A)Increase by $100 billion.
• B)Increase by $15 billion.
• C)Decrease by $100 billion.

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity.

Accounting Net Income

The profit of a company after all expenses and taxes have been deducted from revenues.

Net Present Value Method

A financial analysis tool used to evaluate the profitability of an investment, taking into account the time value of money.