The Banking System Currently Has $100 Billion of Reserves,none of Which

question 59

Multiple Choice

The banking system currently has $100 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 lowers the reserve requirement to 5 percent and at the same time buys $10 billion worth of bonds,then by how much does the money supply change?

• A)It rises by $200 billion.
• B)It rises by $800 billion.
• C)It rises by $1,200 billion.
• D)None of the above is correct.

---

Definitions:

Pendulum

A weight suspended from a pivot so that it can swing freely, often used in clocks for regulating time.

Critical Thinking

A type of thinking that involves careful examination of assumptions and evidence and that is purposeful and deliberate.

Perkins

Depending on the context, Perkins could refer to a person's last name, but in educational or cognitive theory contexts, it might relate to David Perkins, an educational theorist known for his work on intelligence and creativity.

Large Knowledge Base

A comprehensive collection of information, facts, and rules used in decision-making processes or computational systems.