When the Fed Increases the Reserve Requirement, Banks Lend _____

question 135

Multiple Choice

When the Fed increases the reserve requirement, banks lend _____ of their deposits, which leads to a(n) _____ in the money supply.

• A)less; decrease
• B)less; increase
• C)more; decrease
• D)more; increase

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Definitions:

Beta

A measure of the volatility or systematic risk of a security or a portfolio compared to the market as a whole.

Unsystematic Risk

The risk associated with a specific company or industry, which can be mitigated through diversification.

Systematic Risk

The risk inherent to the entire market or market segment, which cannot be eliminated through diversification.

Beta

Beta is a measure of the volatility, or systematic risk, of a security or portfolio in comparison to the market as a whole, indicating its sensitivity to market movements.