Suppose That the Required Reserve Ratio Is 0

question 216

Multiple Choice

Suppose that the required reserve ratio is 0.2,and the Fed buys $5,000 of U.S.government securities from Bank A,which lends $4,000 and keeps $1,000 in its vault in cash.In this round of the money-creation process,the money supply,as measured by M1,has increased by

• A)$1,000
• B)$4,000
• C)$5,000
• D)$10,000
• E)$3,000

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Definitions:

Schizophrenia

Schizophrenia is a chronic and severe mental disorder characterized by distortions in thinking, perception, emotions, language, sense of self, and behavior.

Generalised Anxiety Disorder

A psychological condition characterized by excessive, uncontrollable, and often irrational worry about everyday things that is disproportionate to the actual source of worry.

Phobic Disorder

A type of anxiety disorder characterized by an irrational and excessive fear of an object, situation, or activity that poses little to no actual danger.

Obsessive-Compulsive Disorder

A mental disorder characterized by intrusive thoughts (obsessions) that produce uneasiness, apprehension, fear, or worry; and repetitive behaviors (compulsions) aimed at reducing the associated anxiety.