If the Fed Raises the Reserve Requirement on Deposits from 15

question 59

Multiple Choice

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent, what would happen to the money supply?

• A)It would decrease.
• B)It would increase.
• C)It would remain unchanged.
• D)It depends on the value of interest rates.

---

Definitions:

Pure Discount Loan

A loan where the borrower receives a single lump sum payment at maturity instead of periodic payments, with interest incorporated in the repayment amount.

Present Value Problem

A calculation to determine the current value of a future amount of money or stream of cash flows given a specified rate of return.

Perpetuity

A financial instrument or investment that pays a fixed amount of cash flows indefinitely.

Annuity

An economic offering that guarantees regular payouts to an individual, typically used to supplement the income of those who are retired.