Scenario: Money Supply Changes II Lucia withdraws $8,000 from her chequing account to pay tuition this semester. Assume that the reserve requirement is 20% and that banks do not hold excess reserves. As a result of the withdrawal, excess reserves by_ a) increase; $8,000 b) decrease; $6,400 c) decrease; $1,600 d) decrease; $8,000

Scenario: Money Supply Changes II Lucia withdraws $8,000 from her chequing account to pay tuition this semester. Assume that the reserve requirement is 20% and that banks do not hold excess reserves. As a result of the withdrawal, excess reserves by_ a) increase; $8,000 b) decrease; $6,400 c) decrease; $1,600 d) decrease; $8,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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17. Assume that the required reserve ratio is 25%. If the Fed buys $5 million worth of government bonds from the public, the maximum change in the money supply is: a) -$20 million. (b) -$12.5 million. (c) $12.5 million. (d) $20 million.
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