In a Simplified Banking System Subject to a 25 Percent

question 91

Multiple Choice

In a simplified banking system subject to a 25 percent required reserve ratio, a $1,000 open-market purchase by the Fed would cause the money supply to:

• A) increase by $1,000.
• B) decrease by $1,000.
• C) decrease by $4,000.
• D) increase by $4,000.

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Definitions:

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Contract by which the insurer for a fee agrees to reimburse the insured a sum of money if a loss occurs.

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A telecommunication medium used for transmitting moving images in monochrome, color, or in three dimensions.

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A term generally referring to the extensive reach or exposure of a product, service, or message across a wide audience.