Suppose the Required Reserve Ratio Is 0

question 53

Multiple Choice

Suppose the required reserve ratio is 0.2 and the Fed buys $100,000 in government securities from Big Bank.The commercial banking system creates _____ as a result of this initial injection by the Fed.

• A)$1,000,000
• B)$500,000
• C)$100,000
• D)$80,000
• E)$200,000

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Definitions:

Anvil

a heavy iron block typically used in forging or metalworking as a surface upon which metal can be hammered and shaped.

Stirrup

A ring or frame, hanging down from the saddle of a horse, for a rider's foot.

Auditory Receptors

Auditory receptors are specialized cells located in the inner ear that convert sound waves into electrical signals, which are then interpreted by the brain as sound.

Neural Impulses

Electrical signals that travel along neurons, enabling communication between different parts of the nervous system.