The Banking System Currently Holds $20 Billion in Required Reserves

question 160

Multiple Choice

The banking system currently holds $20 billion in required reserves and zero excess reserves.The Fed lowers the required reserve ratio from 15 percent to 12.5 percent.Assuming that there are no cash leakages,the resulting change in checkable deposits (or the money supply) is approximately

• A)$2.7 billion.
• B)$1.5 billion.
• C)$2.0 billion.
• D)$12.5 billion.
• E)$26.6 billion.

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