In a Simplified Banking System with a 20 Percent Required

question 23

Multiple Choice

In a simplified banking system with a 20 percent required reserve ratio, a $1,000 open-market sale by the Fed would cause the money supply to:

• A) increase by $200.
• B) decrease by $200.
• C) decrease by $5,000.
• D) increase by $5,000.

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Definitions:

Trend Component

A component of time series data that represents the consistent, long-term direction of the data over time.

Regression Analysis

A set of statistical processes for estimating the relationships among variables, often used to predict the value of a dependent variable based on one or more independent variables.

Exponential Smoothing

A time series forecasting method for univariate data that applies diminishing weights to past observations, often used for short-term forecasts.

Random Variation

Unpredictable fluctuations that are inherent in processes or measurement methods and cannot be controlled.