The Banking System Currently Has $10 Billion of Reserves,none of Which

question 72

Multiple Choice

The banking system currently has $10 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 10 percent.If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds,then by how much does the money supply change?

• A)It falls by $12 billion.
• B)It falls by $19 billion.
• C)It falls by $21 billion.
• D)None of the above is correct.

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Definitions:

Adrenaline

A hormone and neurotransmitter that increases heart rate, muscle strength, blood pressure, and sugar metabolism, often associated with the body's "fight or flight" response.

Somatosensory Cortex

An area at the front of the parietal lobes that registers and processes body touch and movement sensations.

Heterosexual

A term describing individuals who are romantically or sexually attracted to people of the opposite gender.

Cognition

The procedure of acquiring comprehension and insights by thinking, experiencing events, and sensory observation.