If Reserves Increase by $50 Billion and the Required Reserve

question 49

Multiple Choice

If reserves increase by $50 billion and the required reserve ratio is 8%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

• A) $40 billion
• B) $400 billion
• C) $62.5 billion
• D) $625 billion

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Definitions:

Ribosomes

Cellular structures where proteins are synthesized, reading mRNA sequences and assembling amino acids into proteins based on genetic instructions.

mRNA Molecules

Messenger RNA molecules that carry genetic information from DNA to the ribosome, where they specify the amino acid sequence of the protein products of gene expression.

Cytoplasm

The gel-like substance within a cell, excluding the nucleus, that contains organelles and is the site of most cellular processes.

Pre mRNA

The initial, unmodified RNA transcript produced during gene transcription, prior to processing into mRNA.