Assume That the Required Reserve Ratio Is 25 Percent

question 83

Multiple Choice

Assume that the required reserve ratio is 25 percent. If the Federal Reserve sells $120 million in government securities to the general public, the money supply will immediately

• A) decrease by $120 million with this transaction, and the decrease in money supply could eventually reach a maximum of $480 million.
• B) decrease by $120 million with this transaction, and the decrease in money supply could eventually reach a maximum of $360 million.
• C) increase by $120 million with this transaction, and the increase in money supply could eventually reach a maximum of $480 million.
• D) increase by $120 million with this transaction, and the increase in money supply could eventually reach a maximum of $360 million.

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Definitions:

Preschool Age

A developmental period in children typically ranging from about 3 to 5 years old, preceding formal schooling.

Disabilities

A term for conditions that impair physical, mental, or sensory functions, impacting an individual’s ability to perform certain activities or participate fully in society.

Diabetes

A chronic medical condition characterized by high levels of sugar (glucose) in the blood, either due to insulin deficiency or insulin resistance.

Hypertensive

Related to or suffering from hypertension, a medical condition in which the blood pressure in the arteries is persistently elevated.