Assume That When $100 of New Reserves Enter the Banking

question 139

True/False

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $800. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $750, then at that same point in time, loans for all banks amount to $6,000.

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Definitions:

Nonreactive

Describes a state or condition in which an individual or substance does not respond or react to a stimulus or change in the environment.

Excitable

Capable of responding rapidly and intensely to stimuli, often used to describe nerve or muscle cells.

Fearful

Feeling afraid or anxious; the emotional response to perceived threats or danger.

Agitated

A state of nervousness or unrest, often characterized by rapid movement or speaking.