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:

Tracheal Tubes

The system of small tubes in insects and some other arthropods that carry air directly to tissues from openings in the exoskeleton.

Body Surface

Refers to the external part or skin of an organism, serving as a protective barrier and interface with the environment.

Salamanders

A group of amphibians characterized by their lizard-like appearance, moist skin, and ability to regenerate lost body parts.

Crustaceans

A diverse group of aquatic animals that have a hard exoskeleton, including species like crabs, lobsters, crayfish, and shrimp.