If the Fed Were to Decrease the Required Reserve Rate

question 40

Multiple Choice

If the Fed were to decrease the required reserve rate from ten percent to five percent, the simple deposit expansion multiplier would:

• A) double.
• B) decrease by 5 percent.
• C) increase by a factor of five.
• D) be half as large as it was before the reduction.

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Definitions:

Government Services

Various forms of services provided to the public by the government, which can include education, healthcare, security, and infrastructure.

Similar Incomes

The scenario in which two or more entities earn incomes that are close in magnitude.

Progressive

A term often used to describe a tax system in which the tax rate increases as the taxable amount or income increases.

Tax System

The comprehensive set of laws and regulations governing the collection of taxes by the government from individuals and businesses.