If the Fed Sells a Member Bank a $3,000 Security,the

question 167

Multiple Choice

If the Fed sells a member bank a $3,000 security,the required reserve ratio is 20 percent,banks hold no excess reserves,and all loans are redeposited,then the money supply (Hint: Compare what the banking system might have done if it had loaned at every opportunity; also include the initial transaction with the Fed.)

• A)increases by less than $15,000
• B)decreases by less than $15,000
• C)increases by $15,000
• D)decreases by more than $15,000
• E)decreases by $15,000

---

Definitions:

Market-Creating Innovation

Innovations that introduce new products or services, creating new demand and potentially new markets.

Lower-Income Segment

A portion of the population or market characterized by lower earnings, often targeted by businesses offering more affordable products or services.

Developing Economies

Countries that are in the process of industrialization, with relatively low per capita income and seeking to improve their economic base.

Market-Creating Innovations

Innovations that establish new markets by solving unserved or underserved problems and fulfilling unmet needs.