Suppose the and the Reserve Requirement Is 10 Percent

question 161

Multiple Choice

Suppose the and the reserve requirement is 10 percent. If Bob writes a check to you for $100 and you choose to cash the check and hold on to $100 in currency, then:

• A) the money supply can increase by as much as $1000.
• B) the money supply will decrease by exactly $100.
• C) the money supply will not change.
• D) the money supply can decrease by as much as $1000.

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Definitions:

Material Fact

A material fact is a fact that, if known, would influence an individual's decision in a transaction or in a legal case, thereby having a significant impact on the outcome.

Recklessly

Acting with disregard for the safety or consequences of one's actions, often leading to potential harm or risk.

Section 12(a)(2)

A provision under the Securities Act of 1933 that provides a remedy for investors who have been sold securities by means of a prospectus or oral communication containing a material misstatement or omission.

Securities Act of 1933

A U.S. federal law enacted to require transparency in financial statements so investors can make informed decisions regarding securities investments; it also introduced regulations to prevent fraud.