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:

Habitat Loss

The destruction, degradation, and fragmentation of natural environments, leading to a decline in biodiversity.

Physical Environment

The natural and physical surroundings in which organisms live, including land, water, atmosphere, and climate conditions.

Cambrian Explosion

A significant event approximately 541 million years ago, characterized by a rapid diversification of life and the appearance of most major groups of animals.

Ediacaran Period

A geological period about 635 to 541 million years ago, marked by the appearance of the earliest large, complex multicellular organisms.