Suppose the Fed Increases Required Reserves from 10% to 20

question 65

Multiple Choice

Suppose the Fed increases required reserves from 10% to 20% of deposits. Assuming that banks are fully loaned-up, the money supply will _____ and the value of the money multiplier will _____ to _____.

• A) rise; fall; 10
• B) fall; rise; 2
• C) rise; rise; 4
• D) fall; fall; 5

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Definitions:

Average Sale Period

The average time it takes for a company to convert its inventory into sales, often used in analyzing a company's efficiency.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including the cost of the materials and labor directly used to create the good.

Beginning Inventory

The value of goods available for sale at the start of an accounting period.

Inventory Turnover

A ratio indicating how many times a company has sold and replaced inventory during a certain period of time.