Answer the question based on the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 12 percent. All figures are in billions of dollars:
Refer to the above data. If the commercial banking system actually loans out the maximum amount it is able to lend, excess reserves will fall:
A. By $28 billion
B. By $22 billion
C. By $20 billion
D. To zero
D. To zero
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Suppose households attempt to increase their money holdings. To stabilize output by countering this increase in money demand, the Federal Reserve would
a. increase government spending. b. increase the money supply. c. decrease government spending. d. decrease the money supply.
A perfectly competitive firm trying to maximize profits in the short run will expand output
A. until total revenue equals total cost. B. until marginal cost equals average variable cost. C. until marginal cost begins to rise. D. as long as marginal revenue is greater than marginal cost.