In a Fractional-Reserve Banking System with No Excess Reserves and No

question 19

Multiple Choice

In a fractional-reserve banking system with no excess reserves and no currency holdings,if the central bank buys $100 million of bonds,

• A) reserves and the money supply increase by less than $100 million.
• B) reserves increase by $100 million and the money supply increases by $100 million.
• C) reserves increase by $100 million and the money supply increases by more than $100 million.
• D) both reserves and the money supply increase by more than $100 million.

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Definitions:

Familiarity

The state of being easily recognizable or well-known to someone due to repeated exposure or experience.

Accountability

The obligation of an individual or organization to account for its activities, accept responsibility for them, and to disclose the results in a transparent manner.

Practical Intelligence

Intelligence that involves the ability to solve everyday problems by utilizing knowledge gained from experience in order to adapt to, shape, or select environments.

Sternberg's Triarchic Theory

A theory of intelligence that considers analytic, creative, and practical aspects.