A soil bank program pays farmers not to grow food on some of their land

Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will increase by:

A. $1 million. B. $20 million. C. $40 million. D. $2 billion.

Refer to Figure 2-17. One segment of the circular flow diagram in the figure shows the flow of funds from economic agents E to market F. Who are economic agents E and what is market F?

A) E = households; F = product markets B) E = households ; F = factor markets C) E = firms; F = product markets D) none of the above