If the Fed Sells $10 Million in Bonds to a Bank

question 235

Multiple Choice

If the Fed sells $10 million in bonds to a bank, and the required reserve ratio is 20 percent, then the banking system can:

• A) decrease the money supply by up to $10 million.
• B) decrease the money supply by up to $40 million.
• C) decrease the money supply by up to $50 million.
• D) decrease the money supply by up to $ 2 million.
• E) increase the money supply by up to $50 million.

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Definitions:

Pool and Sauna

Facilities often found in hotels, gyms, or residential complexes, consisting of a swimming pool for recreation or exercise and a sauna room for dry or wet heat sessions, promoting relaxation and health.

CPA

Stands for Certified Public Accountant, a designation given to accounting professionals who have passed a licensing examination and met other state requirements.

Capital

Refers to financial assets or the financial value of assets, such as funds held in deposit accounts, as well as the tangible machinery and production equipment.

Existing Loan

Refers to a loan that is currently active or outstanding, already agreed upon, and under the process of repayment.