Suppose the banking system has $10 million in reserves and the reserve ratio is 25 percent. Then bankers decide to decrease the reserve ratio to 20 percent. How does this decision eventually change the money supply? Select one: a. increases by $10 million b. increases by $5 million C. increases by $0.5 million d. increases by $20 million
Suppose the banking system has $10 million in reserves and the reserve ratio is 25 percent. Then bankers decide to decrease the reserve ratio to 20 percent. How does this decision eventually change the money supply? Select one: a. increases by $10 million b. increases by $5 million C. increases by $0.5 million d. increases by $20 million
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 7CQ
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
Transcribed Image Text:Suppose the banking system has $10 million in reserves and the reserve ratio
is 25 percent. Then bankers decide to decrease the reserve ratio to 20 percent.
How does this decision eventually change the money supply?
Select one:
a.
increases by $10 million
b.
increases by $5 million
C.
increases by $0.5 million
d.
increases by $20 million
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