Table 21-5. -Refer to Table 21-5.Assume the Fed's Reserve Requirement Is 9

question 76

Multiple Choice

Table 21-5.

-Refer to Table 21-5.Assume the Fed's reserve requirement is 9 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 9 percent requirement.Further assume that people hold only deposits and no currency.Starting from the situation as depicted by the T-account,if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves,then by how much does the money supply eventually increase?

• A) $555.00.
• B) $1,200.00.
• C) $1,777.78.
• D) $2,222.22.

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Definitions:

Cumulative Probability Distribution

A function that gives the probability that a random variable is less than or equal to a certain value.

Monte Carlo Analysis

A statistical technique that uses random sampling and simulation to estimate the probability of different outcomes in a process or decision-making.

Random Number Range

The interval within which random numbers can be generated, used in simulations and probabilistic models to represent unpredictable variables.

Monte Carlo Analysis

A computational algorithm that uses random sampling to obtain numerical results, typically used to solve problems that might be deterministic in principle.