If the Required Reserve Ratio Is 10% and the Fed

question 54

Essay

If the required reserve ratio is 10% and the Fed purchases $20 million worth of securities,what is the simple deposit multiplier and what happens to the amount of deposits in the banking system? Assume that banks do not hold excess reserves and the public does not change its currency holdings.

---

Definitions:

Functionalism

A school of thought in psychology that focuses on how mental and behavioral processes function to enable an organism to adapt, survive, and flourish.

William James

An American philosopher and psychologist, often referred to as the father of American psychology, known for his works on pragmatism and the psychology of religious experience.

Behaviourism

A theoretical approach in psychology that focuses on observable behaviors and external stimuli, neglecting internal mental states.

External Stimuli

Environmental factors or inputs that can provoke a response from an individual or organism, ranging from physical to emotional responses.