Suppose the Banking System Has $10 Million in Reserves and the Reserve

question 70

Multiple Choice

Suppose the banking system has $10 million in reserves and the reserve ratio is 25 percent. Then bankers decide to decrease the reserve ratio to 20 percent. How does this decision eventually change the money supply?

• A) increases by $0.5 million
• B) increases by $5 million
• C) increases by $10 million
• D) increases by $20 million

---

Definitions:

Contingency Contracting

A behavioral intervention technique involving a written agreement between a client and a counselor specifying a behavior to be changed and the consequences that follow as a result.

Token Economy

A behavioral modification system that uses tokens as a form of reinforcement for displaying desired behaviors, which can later be exchanged for various rewards.

Rewards

Positive outcomes or reinforcements that increase the likelihood of a behavior being repeated.

Penalties

Punishments imposed for violating rules, laws, or expectations, intended to deter undesirable actions.