The Banking System Currently Has $100 Billion of Reserves,none of Which

question 59

Multiple Choice

The banking system currently has $100 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 10 percent.If the Fed lowers the reserve requirement to 5 percent and at the same time buys $10 billion worth of bonds,then by how much does the money supply change?

• A)It rises by $200 billion.
• B)It rises by $800 billion.
• C)It rises by $1,200 billion.
• D)None of the above is correct.

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Definitions:

Minority Representation

The inclusion and representation of individuals from smaller or less dominant groups within a larger population, often in governance, organizations, or research.

Common Dividends

Payments made to shareholders from a company's earnings, reflecting the ownership interest in the corporation's profits.

Preemptive Rights

The right of existing shareholders to buy new shares before they are offered to the public, to maintain their proportionate ownership in the company.

Common Stockholders

These are investors who own shares of a company's common stock, granting them voting rights and a portion of the company's profits through dividends.