The Banking System Currently Has $200 Billion of Reserves,none of Which

question 103

Multiple Choice

The banking system currently has $200 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 4 percent.If the Fed raises the reserve requirement to 10 percent and at the same time buys $50 billion worth of bonds,then by how much does the money supply change?

• A)It rises by $600 billion.
• B)It rises by $125 billion.
• C)It falls by $2,500 billion.
• D)None of the above is correct.

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Definitions:

Amide

Organic compounds characterized by a carbonyl group attached to a nitrogen atom, often found in proteins and other important biological molecules.

Stereochemistry

An area of chemistry concerned with the three-dimensional arrangement of atoms in molecules and its impact on their chemical reactions and properties.

Esters

Organic compounds derived from carboxylic acids where the hydrogen in the hydroxyl group is replaced by an alkyl or aryl group, often responsible for the aroma of fruits.

Transesterification

A chemical reaction in which an ester is transformed into another ester through the exchange of the alkoxy group.