Scenario 29-2. The Monetary Policy of Tazi Is Controlled by the Country's

question 39

Multiple Choice

Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi.The local unit of currency is the taz.Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves,75 million tazes of excess reserves,have issued 7,500 million tazes of deposits,and hold 225 million tazes of Tazian Treasury bonds.Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 29-2.Suppose the Bank of Tazi loaned the banks of Tazi 10 million tazes.Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same.By how much would the money supply change?

• A)250 million tazes
• B)200 million tazes
• C)125 million tazes
• D)None of the above is correct.

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Definitions:

Idle Capacity

Refers to the unused production capacity of a company, where equipment and resources are not being used to their full potential due to insufficient demand or operational inefficiencies.

Fixed Costs

Costs that remain constant in total amount regardless of fluctuations in activity level within a relevant period.

Outside Supplier

An external entity that provides goods or services to a company, usually part of the supply chain.

Transfer Price

The cost applied to products or services exchanged between units or affiliates within the same corporation.