Assume a reserve requirement of 10 percent. A commercial bank has total reserves

Question

Assume a reserve requirement of 10 percent. A commercial bank has total reserves of $100,000, excess reserves of $25,000, and total checkable deposits outstanding of $750,000) If the reserve requirement were increased to 15 percent,
a. total expansion of the money supply would be limited to $750,000
b. excess reserves would be decreased to $12,500
c. the bank would have no alternative but to decrease its checkable deposits
d. the bank would be $12,500 short of required reserves




If member banks need to borrow reserves, they must do so through the discount window.
True
False




Raising the reserve requirement or the discount rate always decreases the money supply.
True
False


All members of the Board of Governors are members of the Fed

Explanation / Answer

c. the bank would have no alternative but to decrease its checkable deposits false True True True

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