If the Reserve Ratio Is 5 Percent,banks Do Not Hold

question 71

Multiple Choice

If the reserve ratio is 5 percent,banks do not hold excess reserves,and people do not hold currency,then when the Fed purchases $20 million worth of government bonds,bank reserves

• A)increase by $20 million and the money supply eventually increases by $400 million.
• B)decrease by $20 million and the money supply eventually decreases by $400 million.
• C)increase by $20 million and the money supply eventually increases by $100 million.
• D)decrease by $20 million and the money supply eventually decreases by $100 million.

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Definitions:

Mutualism

A type of symbiotic relationship between two species where both species benefit from the interaction.

Secondary Succession

The process of ecological recovery in an area where a biological community was partially removed but where soil remains.

Primary Succession

Ecological succession that occurs in an environment in which new substrate devoid of vegetation and usually lacking soil, such as a lava flow or area left from retreated glacier, is deposited.

Forest Fire

Uncontrolled fire occurring in woodland or bush areas, which can have both destructive and beneficial effects on ecosystems.