Assume All Banks in the System Started Have a 10

question 89

Multiple Choice

Assume all banks in the system started have a 10 percent required reserve ratio and the Fed made a $20,000 open market purchase. The result would be a(n) :

• A) $200,000 expansion of the money supply.
• B) $20,000 expansion of the money supply.
• C) $20,000 contraction of the money supply.
• D) infinite contraction of the money supply.

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Definitions:

Thirteenth Amendment

Amendment to the United States Constitution that abolished slavery and involuntary servitude, except as punishment for a crime.

Slavery

A practice or system in which individuals are owned as property by others and are forced to work without rights or compensation.

Private Individuals

Persons who act in their own interest or behalf, without holding any public or official position, typically in the context of private life or business.

Bill of Rights

The first ten amendments to the United States Constitution, guaranteeing essential rights and protections, such as freedom of speech and religion.