Multiple Choice
In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the required reserve/deposit ratio is 15 percent. If the Central Bank lowers the required reserve/deposit ratio making the new desired ratio equal to 10 percent, then the money supply in Macroland will ________ to ________ econs, assuming that the public does not wish to change the amount of currency it holds.
A) increase; 4,000
B) increase; 5,000
C) decrease; 4,000
D) decrease; 5,000
Correct Answer:
Verified
Correct Answer:
Verified
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