Answer the question on the basis of the following consolidated balance sheet of the commercial banking system.Assume that the reserve requirement is 20 percent.All figures are in billions and each question should be answered independently of changes specified in all preceding ones. $\begin{array}{c}
\begin{array}{lll}
\quad\quad\quad\underline{\text { Assets}}\
\text { Reserves}\
\text { Securities}\
\text { Loans}\
\text { Property}
\end{array}
\begin{array}{l}
\
\$ 200 \
300 \
500 \
400
\end{array}
\begin{array}{lll}
\quad\quad \underline{\text { Liabilities \& Net Worth }}\
\text { Checkable Deposits}\
\text { Stock Shares}\
\
\
\end{array}
\begin{array}{lll}
\
\$1,100\
400\
\
\
\end{array}
\end{array}$

Refer to the given data.Suppose the Fed wants to increase the money supply by $1,000 billion to drive down interest rates and stimulate the economy.To accomplish this,it could lower the reserve requirement from 20 percent to:

Question

Answer the question on the basis of the following consolidated balance sheet of the commercial banking system.Assume that the reserve requirement is 20 percent.All figures are in billions and each question should be answered independently of changes specified in all preceding ones. $\begin{array}{c}
\begin{array}{lll}
\quad\quad\quad\underline{\text { Assets}}\
\text { Reserves}\
\text { Securities}\
\text { Loans}\
\text { Property} 
\end{array}
\begin{array}{l}
\
\$ 200 \
300 \
500 \
400 
\end{array}
\begin{array}{lll}
\quad\quad \underline{\text { Liabilities \& Net Worth }}\
\text { Checkable Deposits}\
\text {  Stock Shares}\
\
\
\end{array}
\begin{array}{lll}
\
\$1,100\
400\
\
\
\end{array}
\end{array}$

Refer to the given data.Suppose the Fed wants to increase the money supply by $1,000 billion to drive down interest rates and stimulate the economy.To accomplish this,it could lower the reserve requirement from 20 percent to:

Quizplus · Accepted Answer

If the reserve requirement is lowered from 20 percent to 10 percent, the commercial banks will be required to hold only $1100 billion in reserves ($10,000 billion total assets x 10% reserve requirement), freeing up $900 billion ($1000 billion - $100 billion decrease in required reserves) to lend out to consumers and businesses. This will increase the money supply by $900 billion, which is close to the targeted increase of $1000 billion. Lower interest rates resulting from increased lending will stimulate the economy. Therefore, the best choice is A) 10 percent.

Answer the Question on the Basis of the Following Consolidated