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If the Reserve Requirement Is 5%, Households' and Businesses' Desired

Question 49

Multiple Choice

If the reserve requirement is 5%, households' and businesses' desired holding ratio of currency-to-deposits is .1, the ratio of excess reserves to total deposits that banks desire to hold is .05, and the Federal Reserve increases the monetary base by $100 billion, the increase in the money supply would be


A) $500 billion.
B) $220 billion.
C) $550 billion.
D) $2200 billion.

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