The Banking System Currently Has $10 Billion of Reserves, None

question 197

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 20 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 $45 billion.
• B)It falls by $52 billion.
• C)It falls by $55 billion.
• D)None of the above is correct.

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Definitions:

Cholesterol Ratios

A way to assess cardiovascular risk by comparing the levels of different types of cholesterol in the blood.

HDL

High-density lipoprotein, often referred to as "good" cholesterol, which helps remove other forms of cholesterol from the bloodstream.

LDL

Low-Density Lipoprotein, often referred to as "bad" cholesterol, which can accumulate in the walls of blood vessels and lead to heart diseases.

Osteoporosis

A medical condition characterized by weakened bones, making them fragile and more prone to fractures.