Refer to the given data. If the Fed reduced the reserve requirement from 20 percent to 16 percent, excess reserves in the commercial banking system would increase by _____ and the monetary multiplier would rise to ____.
Answer the question on the basis of the following consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement is 20 percent. All figures
are in billions and each question should be answered independently of changes specified in all
preceding ones.
A. $10 billion; 5
B. $40 billion; 6.25
C. $10 billion; 10
D. $40 billion; 12.5
B. $40 billion; 6.25
You might also like to view...
A contestable market is one in which
A) one dominant firm sets the market price, and all other firms are price takers. B) if a firm cuts its price, all other firms will follow the price cut. C) one or a small number of firms operate, but faces competition from potential entrants. D) a group of firms enter into an agreement to restrict output and raise prices.
A supply shock that reduces labor productivity
A) causes accelerating inflation if the Fed attempts to maintain the original output level. B) will increase real wages if nominal wages are flexible. C) will reduce the level of output at the natural level of real GDP even if employment does not decline. D) A and C.
The most significant kind of federal subsidy to railroads was
a. loans from the U.S. government. b. reduced corporate income taxes. c. land grants. d. direct payments based on the number of miles of tracks laid.
An economy is not able to develop because of a lack of capital. Which of the following strategies would you suggest this economy pursue?
A. nationalize private enterprises because the government sector is not motivated by profit maximization B. lower interest rates C. impose quotas on how much capital can be imported from other countries to reduce dependency on foreign capital D. increase the political stability of the economy