If All Banks Are Subject to a Uniform 25% Reserve

question 75

Multiple Choice

If all banks are subject to a uniform 25% reserve requirement and demand deposits are the only form of money,a $1,000 open market sale by the Fed would cause the money supply to

• A)increase by $1,000.
• B)decrease by $1,000.
• C)decrease by $4,000.
• D)increase by $4,000.

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Definitions:

Half-inch Plywood

A standard thickness of plywood, widely used in construction and carpentry, measuring half an inch.

Operating Profit

Earnings from a company's core business activities, excluding deductions of interest and taxes.

Mark-up

A rephrased definition: The amount by which the selling price of an item exceeds its cost price, expressed as a percentage of the cost.

Markdown

A reduction from the original or retail price of a good or service to increase its attractiveness to buyers.