If Reserves Increase by $50 Billion and the Required Reserve

question 49

Multiple Choice

If reserves increase by $50 billion and the required reserve ratio is 8%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

• A) $40 billion
• B) $400 billion
• C) $62.5 billion
• D) $625 billion

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Definitions:

Fluid Intelligence

The facet of human intellect that encompasses the capacity to rationalize, adapt thinking, and tackle novel issues independently of previously gained knowledge.

Fundamental Forms

Basic structures or elements within a discipline or area of study that form the groundwork for further development or understanding.

Seventh President

Andrew Jackson, who served as the President of the United States from 1829 to 1837, known for his populist policies and the Indian Removal Act.

Analytic Intelligence

A form of intelligence that involves abstract planning, strategy selection, focused attention, and information processing, as well as verbal and logical skills.