Table 29-7. -Refer to Table 29-7. Assume the Fed's Reserve Requirement Is

question 130

Multiple Choice

Table 29-7.
-Refer to Table 29-7. Assume the Fed's reserve requirement is 10 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 10 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase?

• A)$37,800
• B)$18,000
• C)$2,000
• D)$16,300

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Definitions:

Rationalization

The process of attempting to explain or justify behavior or attitudes with logical, plausible reasons, even if these are not the real reasons.

Denial

The refusal to accept the truth of a fact or reality, often as a defense mechanism against psychological discomfort.

Sensitivity

The ability or capacity to perceive, understand, and respond appropriately to the emotions, thoughts, or experiences of others.

Effectiveness

The degree to which something is successful in producing a desired result; efficiency.