In Macroland, Currency Held by the Public Is 2,000 Econs

question 148

Multiple Choice

In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the required reserve/deposit ratio is 15 percent. If the Central Bank lowers the required reserve/deposit ratio making the new desired ratio equal to 10 percent, then the money supply in Macroland will ________ to ________ econs, assuming that the public does not wish to change the amount of currency it holds.

• A)increase; 4,000
• B)increase; 5,000
• C)decrease; 4,000
• D)decrease; 5,000

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