Suppose the Entire Banking System Has a Required Reserve Ratio

question 97

Multiple Choice

Suppose the entire banking system has a required reserve ratio of 0.20.How much can the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system?

• A) $20 billion.
• B) $5 billion.
• C) $1 billion.
• D) $200 million.

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Definitions:

Theoretical Perspectives

Frameworks or ways of viewing phenomena, typically used in academic disciplines to guide research and understand complex issues.

Cognitive-Behavioral Explanation

A perspective suggesting that dysfunctional thinking and learned patterns of unhelpful behavior play a role in the development of psychological disorders.

Negative Thoughts

Cognitive processes or thoughts that are detrimental to one’s self-esteem, mood, and actions, often a focus in cognitive-behavioral therapy.

Biochemical Imbalances

Abnormal levels of certain chemicals in the body that can affect physical and mental health.