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:

Elbow

The joint connecting the forearm to the upper arm, allowing for the bending and extending of the arm.

Knee

A hinge joint that connects the thigh bone (femur) to the shin bone (tibia).

Shoulder

The region of the body where the upper arm bone (humerus), shoulder blade (scapula), and collarbone (clavicle) meet.

Diarthrosis

A type of joint that allows for free movement between the bones it connects, commonly known as a synovial joint.