On a Certain Date, the Banking System Had $40 Billion

question 5

Multiple Choice

On a certain date, the banking system had $40 billion in excess reserves. The legally required reserve ratio was 20 percent. Potentially, if these funds were loaned and eventually the entire amount re-deposited with a bank, the banking system as a whole could increase the money supply by

• A) a maximum of $40 billion.
• B) a maximum of $160 billion.
• C) a maximum of $200 billion.
• D) more than $200 billion.

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Definitions:

Buffer

A temporary storage area in computing used to manage data being transferred between two devices or processes.

Active Voice

A sentence structure where the subject performs the action of the verb, leading to clear and direct communication.

Passive Voice

A sentence construction where the subject of the sentence is acted upon by the verb, often hiding the action's performer.

Goodwill Conclusion

The final part of a communication that expresses friendly intent and seeks to maintain a positive relationship with the audience.