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.

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Definitions:

Downsizing

The process of reducing the number of employees on the company's payroll as a means of cutting costs or restructuring the organization.

Corporate Restructuring

The act of reorganizing a company's legal, ownership, operational, or other structures to make it more profitable or better organized for its current needs.

Task Significance

The degree to which a job has a substantial impact on the lives or work of other people.

Autonomy

The degree to which a job provides an employee with the freedom and independence to schedule their work and determine how it is done.