If Bob Withdraws $100 from His Checking Account and the Reserve

question 56

Multiple Choice

If Bob withdraws $100 from his checking account and the reserve requirement is 10 percent, then:

• A) the money supply can decrease by as much as $1000, if banks hold some excess reserves.
• B) the money supply can increase by as much as $1000, if banks hold no excess reserves.
• C) the money supply can decrease by as much as $100, if banks hold some excess reserves.
• D) the money supply can decrease by as much as $1000, if banks hold no excess reserves.

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Definitions:

Superordinate Level

A term in cognitive psychology that refers to the highest, most general level of classification in a category hierarchy.

Basic-Level Category

The most inclusive level within a hierarchy of categories that can be readily and consistently identified by people.

Sandwich

A food item typically consisting of vegetables, sliced cheese, or meat placed between slices of bread.