The required Reserve ration is 25% an additional 5,000 of reserves can increase the money supply by?
A. 1,250
B. 125,000
C. 25,000
D. 20,000
E. 5,000
D. 20,000
(0.25 / 1) = (5,000 / x)
0.25x = 5,000 x = 5,000 / 0.25
x = 20,000
You might also like to view...
What are the defining features of classical macroeconomics and what policies do classical macroeconomists recommend?
What will be an ideal response?
The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as
A) risk sharing. B) risk aversion. C) risk neutrality. D) risk selling.
Jim has estimated elasticity of demand for gasoline to be 0.7 in the short-run and 1.8 in the long run. A decrease in taxes on gasoline would:
a. lower tax revenue in both the short and long run. b. raise tax revenue in both the short and long run. c. raise tax revenue in the short run but lower tax revenue in the long run. d. lower tax revenue in the short run but raise tax revenue in the long run.
Government regulations to insure the safety of bank deposits and to control the money supply include
a. limitations on the types and quantities of assets in which banks may invest. b. elimination of the need for required reserves. c. setting interest rate ceilings on savings and money market deposit accounts. d. All of the above are correct.