If the Required Reserve Ratio Is 0

question 87

Multiple Choice

If the required reserve ratio is 0.05 and the Fed sells a $2,000 bond directly to an individual who pays for it with a check,what will happen to the money supply?

• A) The money supply will increase by $2,000.
• B) The money supply will decrease by $2,000.
• C) The money supply will increase by $100.
• D) The money supply will decrease by $100.
• E) The money supply will decrease by $200.

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Definitions:

Sperm Cell Production

The process of generating sperm cells, which are male reproductive cells responsible for fertilization.

Jellylike Outer Covering

This may refer to a biological feature of organisms, such as the vitreous humor in the eye or the jellylike layer surrounding some bacterial cells.

Egg Cells

Female reproductive cells, or ova, which, when fertilized by sperm, can develop into an embryo.

Fetus

The developing human organism from 9 weeks after conception to birth.