Assume That the Banking System Has $200 Billion in Reserves

question 172

Multiple Choice

Assume that the banking system has $200 billion in reserves.There are no excess reserves in the system.If the reserve requirement is decreased from 10 percent to 8 percent, what will happen to the level of excess reserves in the system?

• A)There will be a deficiency of $40 billion in reserves.
• B)There will be a deficiency of $20 billion in reserves.
• C)There will be $20 billion in excess reserves.
• D)There will be $40 billion in excess reserves.

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Definitions:

Classical Conditioning

A technique of learning where repetitive association of two stimuli leads to a response that, while initially induced by the second stimulus, is eventually induced by the first stimulus alone.

Rescorla

Refers to Robert A. Rescorla, a psychologist known for his work on the theory of conditioning and learning.

Excited

A heightened state of energy and enthusiasm, often in anticipation of something positively anticipated.

Refrigerator

An appliance used for keeping food and drinks cold.