If a Bank Uses $200 of Excess Reserves to Make

question 33

Multiple Choice

If a bank uses $200 of excess reserves to make a new loan when the reserve ratio is 15 percent,this action by itself initially makes the money supply

• A)and wealth increase by $200.
• B)and wealth decrease by $200.
• C)increase by $200 while wealth does not change.
• D)decrease by $200 while wealth decreases by $200.

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Definitions:

Total Output

The total value of all goods and services produced in an economy during a specific time period.

Government Purchases

Involves spending by the government on goods and services that directly contribute to the economy's aggregate demand.

Real GDP

Real Gross Domestic Product, which is the inflation-adjusted measure of the total value of all goods and services produced within a certain time frame.

Price Level

A gauge for the mean cost of products and services across an economy at a given time.