If the Reserve Ratio Is 15 Percent, and Banks Do

question 366

Multiple Choice

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $65 million worth of bonds to the public, bank reserves

• A)increase by $65 million and the money supply eventually increases by $266.67 million.
• B)increase by $65 million and the money supply eventually increases by $433.33 million.
• C)decrease by $65 million and the money supply eventually decreases by $266.67 million.
• D)decrease by $65 million and the money supply eventually decreases by $433.33 million.

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Definitions:

Quantities X and Y

Refers to variables or values that are often used in mathematical equations or statistical models to represent data, measurements, or unknowns.

Association

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Scatterplot

A type of graph used in statistics to visually display and compare two or more sets of related data.

Upward Curvature

A geometric shape or line that curves or bends upwards, often used to describe graphs, paths, or surfaces.