If the Required Reserve Rate Is Ten Percent and Banks

question 64

Multiple Choice

If the required reserve rate is ten percent and banks do not hold any excess reserves and there are no changes in currency holdings, a $1 million open market purchase by the Fed will result in what change in loans?

• A) No change
• B) A decrease of $1 million
• C) An increase of $10 million
• D) An increase of $1 million

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Definitions:

Criminal Act

An action or omission that constitutes an offense that may be prosecuted by the state and is punishable by law.

Biological Father

The male parent who has contributed the genetic material to a child.

Born out of Wedlock

Refers to a child born to parents who are not legally married to each other at the time of the child's birth.

Snob Effect

The phenomenon where the demand for a certain good increases as it becomes more exclusive or prestigious, independent of its price.