The Banking System Currently Has $100 Billion of Reserves,none of Which

question 23

Multiple Choice

The banking system currently has $100 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 10%.If the Fed lowers the reserve requirement ratio to 5% and at the same time buys $10 billion dollars of bonds,then by how much does the money supply change?

• A)It rises by $800 billion.
• B)It rises by $990 billion.
• C)It rises by $1220 billion
• D)None of the above is correct.

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Definitions:

DSM-III-R

DSM-III-R, the Diagnostic and Statistical Manual of Mental Disorders, Third Edition, Revised, is a historical version of the American Psychiatric Association's manual, used for diagnosing and classifying mental disorders.

Mental Disorder

A wide range of mental health conditions that affect one's mood, thinking, and behavior.

Free-Floating Anxiety

Anxiety that is not linked to any specific situation or object and is a persistent feeling of uneasiness or dread.

Realistic Source

A credible or authentic origin or means that provides information or material.