Suppose That, for Every 1-Percentage-Point Decline of the Discount Rate

question 1

Multiple Choice

Suppose that, for every 1-percentage-point decline of the discount rate, commercial banks collectively borrow an additional $2 billion from Federal Reserve Banks. Also assume that the reserve ratio is 20 percent. If the Fed increases the discount rate from 4.0 percent to
4) 25 percent, bank reserves will

• A) increase by $0.5 billion and the money supply will increase by $2.5 billion.
• B) decline by $0.5 billion and the money supply will decline by $2.5 billion.
• C) increase by $0.75 billion and the money supply will increase by $3.75 billion.
• D) increase by $1 billion and the money supply will increase by $5 billion.

Recognize the impact of cognitive limitations and heuristics on decision-making.

Grasp the concept of risk management and its importance in the decision-making process.

Acknowledge the limitations and challenges in achieving optimal decisions and the predominance of satisficing in decision-making.

Understand the impact of maintenance functions on group cohesion and teamwork.

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Definitions:

Controlled Process

Mental activities that require focused attention and are performed deliberately, often involving conscious effort.

Roller-Skating

A recreational activity, competitive sport, or mode of transportation that involves moving on surfaces with shoes equipped with small wheels.

Blinking

A rapid, reflexive closure of the eyelid to protect the eye from foreign objects, dryness, or to spread tears across and remove irritants from the surface of the eye.

Interpreter

A person or system that translates spoken or written language from one language to another or someone who helps to clarify or explain informations or data.