Answer the question on the basis of the following table for a commercial bank or thrift:

Refer to the table. If the legal reserve ratio falls from 25 percent to 10 percent, excess reserves of this single bank will:

A. Fall by $6,000 and the monetary multiplier will decline from 30 to 10.

B. Rise by $60,000 and the monetary multiplier will increase from 4 to 10.

C. Fall by $2,000 and the monetary multiplier will decline from 10 to 4.

D. Rise by $6,000 and the monetary multiplier will increase from 4 to 10.

Question

Weston Grant

Business

14 September, 21:43

Answer the question on the basis of the following table for a commercial bank or thrift:

Refer to the table. If the legal reserve ratio falls from 25 percent to 10 percent, excess reserves of this single bank will:

A. Fall by $6,000 and the monetary multiplier will decline from 30 to 10.

B. Rise by $60,000 and the monetary multiplier will increase from 4 to 10.

C. Fall by $2,000 and the monetary multiplier will decline from 10 to 4.

D. Rise by $6,000 and the monetary multiplier will increase from 4 to 10.

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Answers (1)

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Lily Yoder · Answer 1

If the legal reserve ratio falls from 25 percent to 10 percent, excess reserves of this single bank will rise by $6,000 and the monetary multiplier will increase from 4 to 10. The correct answer is D.