Suppose the Fed Reduces the Reserve Ratio from 0

question 48

Multiple Choice

Suppose the Fed reduces the reserve ratio from 0.25 to 0.20 and the current level of demand deposits is $10,000.By how much would excess reserves change?

• A) Excess reserves would increase by $2,500.
• B) Excess reserves would increase by $2,000.
• C) Excess reserves would decrease by $500.
• D) Excess reserves would increase by $500.
• E) Excess reserves would increase by $4,500.

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Definitions:

Infant Memory

The capacity for infants to encode, store, and retrieve information, which begins to develop shortly after birth.

Memory Item

A specific piece of information or knowledge that has been retained by the brain and can be recalled or remembered.

Enhanced Encoding

The process of improving the way information is absorbed and stored in the memory through the use of techniques or stimuli that strengthen memory traces.

Memory Pruning

Memory pruning involves the process by which the brain removes or weakens certain neural connections that are not often used, thereby optimizing cognitive functioning by removing unnecessary information.