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.

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Definitions:

Pain Medication

Drugs or substances used to alleviate discomfort and pain.

Granulation Tissue

New connective tissue and microscopic blood vessels that form on the surfaces of a wound during the healing process.

Perineal Skin

Skin in the perineal area, between the anus and the vulva in females and the anus and scrotum in males, sensitive to irritation and injury.

Maceration

The softening and breaking down of skin resulting from prolonged exposure to moisture.