The Banking System Currently Has $50 Billion of Reserves,none of Which

question 111

Multiple Choice

The banking system currently has $50 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 sells $10 billion worth of bonds,then by how much does the money supply change?

• A)It falls by $20 billion.
• B)It falls by $110 billion.
• C)It falls by $180 billion.
• D)None of the above is correct.

---

Definitions:

Stable

Characterized by consistency, reliability, and resistance to change or disorder.

Unstable

Characterized by a lack of stability, unpredictability, or being prone to sudden change.

Goal-Related Thinking

is the cognitive process involved in setting, pursuing, and achieving personal objectives.

Outcome Expectancies

Beliefs about the consequences of certain behaviors, which can influence an individual's motivation and actions.