The Banking System Currently Has $10 Billion of Reserves, None

question 197

Multiple Choice

The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 20 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?

• A)It falls by $45 billion.
• B)It falls by $52 billion.
• C)It falls by $55 billion.
• D)None of the above is correct.

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Definitions:

Henry George

An American political economist and journalist who advocated for the "single tax" on land to improve social equity.

Single-Tax Movement

A political and economic ideology advocating for a tax system based solely on land value.

Henry George

A 19th-century American economist and social reformer known for his advocacy of a single tax on land value.

Resource Allocation

The process of assigning and managing assets and resources in the most efficient way to meet organizational or economic objectives.