The Banking System Currently Has $50 Billion of Reserves,none of Which

question 293

Multiple Choice

The banking system currently has $50 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 12.5 percent and at the same time sells $10 billion of bonds,then by how much does the money supply change?

• A) It falls by $20 billion.
• B) It falls by $110 billion.
• C) It falls by $180 billion.
• D) None of the above is correct.

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Definitions:

Overcrowding

A condition in which a space contains more people than can comfortably or safely accommodate, often leading to stress and health issues.

GAS

General Adaptation Syndrome, a model describing the body's short-term and long-term reactions to stress, inclusive of the stages alarm, resistance, and exhaustion.

Resistance

In psychology, resistance is the unwillingness or inability of a patient in psychotherapy to engage with certain memories, feelings, or thoughts that are deemed painful or distressing.

Stress

The process by which we perceive and respond to certain events, called stressors, that we appraise as threatening or challenging.