Table 29-7. -Refer to Table 29-7. Assume the Fed's Reserve Requirement Is

question 130

Multiple Choice

Table 29-7.
-Refer to Table 29-7. Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase?

• A)$37,800
• B)$18,000
• C)$2,000
• D)$16,300

---

Definitions:

Monthly Payments

Regular payments made over a period, often in the context of loans or leases where the total amount owed is divided into equal installments over time.

Mortgage

A legal agreement by which a bank or other creditor lends money at interest in exchange for taking the title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

Investment Earnings

The return or income generated from various forms of investments, such as stocks, bonds, or real estate.