If a Bank Uses $100 of Excess Reserves to Make

question 252

Multiple Choice

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

• A)and wealth increase by $100.
• B)and wealth decrease by $100.
• C)increase by $100 while wealth does not change.
• D)decrease by $100 while wealth decreases by $100.

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Definitions:

Long-Term Memory

The type of memory responsible for the storage of information over an extended period, potentially for a lifetime.

Short-Term

Relating to or occurring on a brief or immediate timeframe, often contrasted with long-term.

Procedural

Relating to the prescribed method or established process by which something is done, accomplished, or organized.

Long-Term

Referring to a prolonged period of time, often used in the context of memory or investments spanning years or decades.