If We Assume a Ten Percent Required Reserve Rate, and Banks

question 45

Multiple Choice

If we assume a ten percent required reserve rate, and banks not holding any excess reserves and no change in currency holdings, an open market sale of $5 million of U.S. Treasury securities by the Fed, will result in deposits:

• A) decreasing by $50 million.
• B) increasing by $5 million.
• C) increasing by $50 million.
• D) not changing.

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Definitions:

Self-efficacy

A person's confidence in their ability to carry out actions that are required to achieve particular outcomes.

Verbal Persuasion

A method of influence involving the use of language to convince or persuade others to change their thoughts, beliefs, or actions.

Activity Failure

A situation where an attempt to perform an action does not result in the expected goal or outcome, often leading to learning or modification of efforts.

Adults

Individuals who have reached the age where they are considered legally responsible for their actions and have attained full physical development.