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:

Sympathetic Nervous System

A part of the autonomic nervous system that activates what is often termed the fight or flight response, preparing the body for rapid action in response to threats.

Central Nervous System

The complex system of nerves consisting of the brain and spinal cord that regulates and coordinates body activities.

Parasympathetic Nervous System

The parasympathetic nervous system is part of the autonomic nervous system responsible for conserving energy and bringing the body to a restful state after periods of stress or danger.

Somatic Nervous System

The part of the peripheral nervous system that handles voluntary control of body movements via skeletal muscles, and conveys sensory and motor information to and from the central nervous system.