The Banking System Currently Has $100 Billion of Reserves, None

question 36

Multiple Choice

The banking system currently has $100 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 lowers the reserve requirement to 8 percent and at the same time buys $10 billion worth of bonds, then by how much does the money supply change?

• A)It rises by $225 billion.
• B)It rises by $375 billion.
• C)It rises by $675 billion.
• D)None of the above is correct.

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Definitions:

Cloisonné

A decorative metalwork technique employing cloisons; also, decorative brickwork in later Byzantine architecture.

Book of Kells

An illuminated manuscript Gospel book in Latin, containing the four Gospels of the New Testament, known for its rich ornamental decoration, produced in medieval Ireland.

Medieval Irish Books

Illuminated manuscripts produced in Ireland during the medieval period, renowned for their intricate decoration and significant in the study of early Christian Irish culture.

Classical Style

Art, architecture, and literature that draws on the principles and styles of ancient Greece and Rome, characterized by harmony, balance, and clarity.