The Reserve Requirement Is 4%, Banks Hold No Excess Reserves

question 124

Multiple Choice

The reserve requirement is 4%, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 of bonds what happens to the money supply?

• A)it increases by $250,000
• B)it increases by $200,000
• C)it decreases by $200,000
• D)it decreases by $250,000

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Definitions:

Agreeableness

A personality trait characterized by warmth, kindness, empathy, and a desire for social harmony.

Fundamental Interpersonal Relations Orientation

A theory or framework that describes how individuals relate to one another within the context of interpersonal relationships, focusing on involvement, control, and affection.

Intellectual Stimulation

The act of encouraging critical thinking, innovation, and creative problem-solving in individuals or groups.

Instrumental Support

The provision of tangible assistance or resources, such as financial aid, goods, or services, which helps someone achieve something or deal with problems.