The Required Reserve Ratio Is 0

question 116

Multiple Choice

The required reserve ratio is 0.2, the level of deposits is $1,000, the level of currency held by the public is $500, the level of excess reserves is $300, the level of money market funds is $500 and the level of time deposits is $1,500. If the Fed lowers the monetary base by $100, what is the change in M1?

• A) M1 falls by $350
• B) M1 falls by $244
• C) M1 falls by $150
• D) M1 falls by $100

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Definitions:

Master Budgets

A comprehensive financial planning document that consolidates all of a company's budgets, serving as a financial roadmap.

Fiscal Year

A 12-month period used for accounting and financial reporting purposes, which may not align with the calendar year.

Quarterly Income Statement

A financial report that displays a company's revenues, expenses, and net income over a three-month period.

Reportable Segments

Operational parts of a company with distinguishable financial information that is reported separately.