Suppose the Reserve Ratio Is 4 Percent,banks Do Not Hold

question 102

Multiple Choice

Suppose the reserve ratio is 4 percent,banks do not hold excess reserves,people do not hold currency,and the Bank of Canada purchases $25 million of government bonds.Which statement best describes the effects of Bank of Canada's purchase?

• A) Bank reserves increase by $25 million,and the money supply eventually increases by $500 million.
• B) Bank reserves decrease by $25 million,and the money supply eventually increases by $500 million.
• C) Bank reserves increase by $25 million,and the money supply eventually decreases by $500 million.
• D) Bank reserves decrease by $25 million,and the money supply eventually decreases by $500 million.

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Definitions:

Detecting Stimulus

The process by which organisms identify and respond to environmental changes or signals.

Recognizing Stimulus

The act of identifying a specific stimulus from a set of similar stimuli, based on prior experience or knowledge.

Sensation

The process by which sensory receptors and the nervous system receive and represent stimulus energies from our environment.

Bottom-Up Processing

An approach where perception begins with the stimuli whose reception is made by sensory receptors, leading to higher-level processing.