Suppose the Required Reserve Ratio Is 0

question 2

Multiple Choice

Suppose the required reserve ratio is 0.2,and the Fed buys $5,000 of U.S.government securities from Bank A,which lends $4,000 and keeps $1,000 in its vault as cash.In this round of the money-creation process,the M1 money supply has increased by:

• A)$1,000.
• B)$4,000.
• C)$5,000.
• D)$10,000.
• E)$3,000.

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Definitions:

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A neurodegenerative disorder characterized by tremors, stiffness, slowness of movement, and balance problems, due to a loss of dopamine-producing brain cells.

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A progressive eye condition affecting the retina, leading to the loss of central vision, primarily in older adults.