The Banking System Currently Has $200 Billion of Reserves,none of Which

question 58

Multiple Choice

The banking system currently has $200 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 4%.If the Fed raises the reserve requirement to 5% and at the same time buys $50 billion dollars of bonds,then by how much does the money supply change?

• A)It rises by $1000 billion.
• B)It rises by $1250 billion.
• C)It falls by $950 billion.
• D)None of the above is correct.

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Definitions:

Net Operating Income

A measure of a company's profitability that excludes interest and income tax expenses.

Monthly Sales

The total revenue generated from the sale of products or services within a specific month.

Margin of Safety

The difference between actual or expected sales and sales at the break-even point.

Units

Units are individual portions or segments of a whole, such as items produced, sold, or analyzed in a specific context, serving as a basic measure of quantity.