The Banking System Currently Has $200 Billion of Reserves,none of Which

question 103

Multiple Choice

The banking system currently has $200 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 4 percent.If the Fed raises the reserve requirement to 10 percent and at the same time buys $50 billion worth of bonds,then by how much does the money supply change?

• A)It rises by $600 billion.
• B)It rises by $125 billion.
• C)It falls by $2,500 billion.
• D)None of the above is correct.

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Definitions:

Acquisition

The process by which one company takes over another and becomes the new owner.

Synergy Value

The additional value created by combining two companies, often expected from efficiencies or enhanced market power.

Cash Deal

A business transaction where payment is made in full using cash at the time of the transaction.

Post-Merger

Pertains to the period or activities that follow the completion of a merger, focusing on the integration of the entities involved and the realization of synergies.