The Banking System Currently Has $10 Billion of Reserves,none of Which

question 154

Multiple Choice

The banking system currently has $10 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 10%.If the Fed raises the reserve requirement ratio to 20% and at the same time buys $1 billion dollars of bonds,then by how much does the money supply change?

• A)It falls by $45 billion.
• B)It falls by $52 billion.
• C)It falls by $55 billion.
• D)None of the above is correct.

---

Definitions:

Emergency Situations

Scenarios or conditions that require immediate attention and action due to the potential risk to life, health, property, or environment.

Thyroid

A gland located in the neck that produces hormones regulating the body's metabolic rate, heart and digestive function, muscle control, brain development, and maintenance of bones.

Abdomen

The part of the body containing the digestive organs, in humans located between the chest and the pelvis.

Adrenal Glands

Small, triangular glands located on top of both kidneys that produce hormones regulating metabolism, immune system, blood pressure, and stress responses.