Suppose the Federal Reserve Increases Deposits at Financial Institutions by $50

question 64

Multiple Choice

Suppose the Federal Reserve increases deposits at financial institutions by $50 billion through its open market operations.If the reserve requirement for all deposits is increased from 8% to 10% at the same time the Fed increases deposits,what is the maximum impact the Fed's actions can have on total deposits?

• A) $575 billion increase
• B) $450 billion increase
• C) $2.5 trillion increase
• D) Actually,deposits would decrease,but there is not enough information to determine by what amount.
• E) None of the above.

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Definitions:

Enforceable

A characteristic of a legal agreement or obligation that allows it to be legally upheld or compelled in a court of law.

Hyperlink

A digital reference or link from one document or webpage to another within the same or a different website.

Estate

All of the money and property owned by a particular person, especially at death.