If a Bank Uses $80 of Excess Reserves to Make

question 162

Multiple Choice

If a bank uses $80 of excess reserves to make a new loan when the reserve ratio is 25 percent,what happens to the money supply in the very short term?

• A)It decreases by $80.
• B)It increases by $20.
• C)It decreases by $20.
• D)It increases by $80.

---

Definitions:

Investment Range

The spectrum or variety of investment amounts or categories that an individual or entity is willing to commit to a project or asset.

Venture Capitalists

Investors who provide capital to startups and small businesses with long-term growth potential.

Equity

Represents fairness or justice in the way people are treated and involves ensuring that everyone has access to equal opportunities.

Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.