Table 29-6. -Refer to Table 29-6. Assume the Fed's Reserve Requirement Is

question 71

Multiple Choice

Table 29-6.
-Refer to Table 29-6. Assume the Fed's reserve requirement is 5 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 5 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase?

• A)$10,833.33.
• B)$13,000.
• C)$8,333.33.
• D)$10,000.

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Definitions:

Conservation of Volume

A cognitive ability in child development where the understanding that volume remains unchanged even when its shape changes is recognized.

Egocentrism

The inability to differentiate between oneself and other people, often characterized by a lack of empathy and an overemphasis on one's own perspective.

Cross-modal Transference

The ability to transfer sensory information from one modality to another, such as identifying objects by touch that have only been seen before.

Tertiary Circular Reactions

The fifth stage in Piaget's sensorimotor stage of cognitive development, occurring from about 12 to 18 months of age, where infants explore the environment and understand causality through trial and error.