If an Increase of $10 Million in Excess Reserves Increases

question 90

Multiple Choice

If an increase of $10 million in excess reserves increases checkable deposits in the banking system by a maximum of $50 million, the required reserve ratio would be _____

• A) 0 percent.
• B) 5 percent.
• C) 10 percent.
• D) 20 percent.
• E) 2 percent.

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Definitions:

Bond Investments

Financial securities that represent a loan made by an investor to a borrower, typically corporate or governmental.

Investment Amount

The total sum of money allocated to a particular investment or portfolio.

Bonds

A fixed income investment in which an investor loans money to an entity (corporate or sovereign) which borrows the funds for a definite period at a variable or fixed interest rate.

Excess Cash

Surplus funds that are not required for immediate operational needs or investment purposes.