If the Reserve Ratio Is 10%, and Banks Do Not

question 223

Multiple Choice

If the reserve ratio is 10%, and banks do not hold excess reserves, when the Fed purchases $10 million of government bonds, bank reserves

• A) increase by $10 million and the money supply could eventually increase by $10 million.
• B) decrease by $10 million and the money supply could eventually decrease by $100 million.
• C) increase by $10 million and the money supply could eventually increase by $100 million.
• D) decrease by $10 million and the money supply could eventually decrease by $10 million

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Definitions:

Strength

The quality or state of being physically strong.

Negatively Correlated

A connection between two factors where as one factor rises, the other falls, and the reverse is also true.

Sets Of Scores

Groups or collections of numerical values, often used in statistics to represent data points from measurements or observations.

Decreases

A reduction or decline in value or quantity.