Ambassador Bank has $5 million in deposits and $750,000 in reserves, with a reserve requirement ratio of 15 percent. If the Fed lowers the reserve requirement ratio to 12 percent, Ambassador Bank’s new excess reserves could potentially expand the money supply by ______.
a. $1,000,000
b. $150,000
c. $1,250,000
d. $250,000
c. $1,250,000
You might also like to view...
Suppose that an economy is initially producing at the full-employment level of output. Now suppose there is a reduction in the money supply. Other things being equal we can expect
A) demand-side inflation. B) supply-side inflation. C) deflation. D) cost-pull inflation.
Citicorp charges an 11 percent interest rate on all new car loans. If the inflation rate is 6 percent, Citicorp receives a real interest rate of
A) 11 percent. B) 6 percent. C) 1.83 percent. D) 0.54 percent. E) 5 percent.
In the figure above, if no one owns the lake, what is the deadweight loss in the market?
A) $2,400 per month B) $1,800 per month C) $3,600 per month D) zero
Monetarists believe in all of the following except
a. steady growth in inflation will yield stable output. b. steady growth in the money supply will yield stable output. c. fluctuations in the money supply are responsible for business cycles. d. the Fed should not be involved in trying to stabilize the economy.