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:

Direct Restructuring Costs

Expenses directly associated with the process of restructuring a business or organizational operations, separate from indirect or incidental costs.

Indirect Restructuring Costs

Costs associated with reorganizing a business that are not directly connected to the physical process of restructuring, such as financial or reputational impacts.

Professional Judgement

The use of professional knowledge and skills to make decisions and solve problems.

Best Estimate

The amount which represents, as closely as possible, what the entity would rationally pay to settle the present obligation at the end of the reporting period or to provide consideration to a third party to assume it.