Suppose the Federal Reserve System Has a Required Reserve Ratio

question 67

Multiple Choice

Suppose the Federal Reserve System has a required reserve ratio of 0.20.If the Open Market Committee sells $10 billion of securities to the commercial banking system,then before the money multiplier takes effect,initially excess reserves

• A)Decrease by $10 billion.
• B)Increase by $50 billion.
• C)Increase by $10 million.
• D)Decrease by $50 billion.

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Definitions:

Natural Log

The logarithm to the base e, where e is an irrational constant approximately equal to 2.71828, often used in mathematics, physics, and engineering.

Risk Averter

An individual who prefers outcomes that are certain over those with any level of risk, usually willing to accept lower returns to avoid uncertainty.

Expected Value

A calculated average outcome of a random variable, considering all possible outcomes and their probabilities.

Natural Log

A logarithm to the base e (where e is approximately 2.71828), used extensively in mathematical, economic, and scientific applications.