Use the Following to Answer Questions

question 210

Multiple Choice

Use the following to answer questions :
-(Scenario: Assets and Liabilities of the Banking System) Look at the scenario Assets and Liabilities of the Banking System. Suppose that the reserve ratio is 10% and the Federal Reserve sells $66,700 worth of U.S. Treasury bills to the banking system. If the banking system does NOT want to hold any excess reserves, _____ will be _____ the money supply.

• A)$667,000; subtracted from
• B)$667,000; added to
• C)$250,000; subtracted from
• D)$250,000; added to

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Definitions:

Blank Indorsement

An endorsement on a financial instrument, such as a check, that specifies no endorsee, making it payable to the bearer.

Trust

A fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.

Deposit Only

A restriction placed on a bank account, indicating that the funds can only be deposited and cannot be directly withdrawn or used for other transactions.

Restrictive Endorsements

Limiting conditions or instructions written on the back of negotiable instruments, like checks, controlling their use or further transfer.