The Fed Changes Reserve Requirements from 10 Percent to 14

question 5

Multiple Choice

The Fed changes reserve requirements from 10 percent to 14 percent,thereby eliminating $750 million in excess reserves. The total change in deposits (with no drains) would be (rounded)

• A)$7.917 billion.
• B)$6.630 billion.
• C)$5.357 billion.
• D)$4.934 billion.
• E)none of the options.

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Definitions:

Replacement Warranty

A guarantee that if a product fails or breaks down within a specified period, it will be replaced at no cost to the customer.

Quick Assets

Liquid assets immediately available to meet current liabilities, including cash, marketable securities, and accounts receivable.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value due to changes in interest rates.

Product Warranty Expense

Costs associated with the repair or replacement of defective products during the warranty period.