Suppose that a bank begins with 500 million in deposits and 100 million in reserves and is just meeting its desired reserve ratio. Now suppose a decrease in the required reserve ratio lowers the desired reserve ratio to 10 percent.
After the fall in the desired reserve ratio but before the bank makes any changes, the bank's excess reserves are A) 0.
B) 400 million.
C) 450 million.
D) 50 million.
Question 2
In the above figure, the equilibrium price of a paperback book is 6 per book and the equilibrium quantity is 3 million books. The National Literature Board convinces the government to impose a price ceiling of 6 per book.
At this price, the quantity of books supplied to the market will be A) 3 million a month and will equal the quantity demanded.
B) less than 3 million a month and will exceed the quantity demanded.
C) less than 3 million a month and will be less than the quantity demanded.
D) more than 3 million a month and will exceed the quantity demanded.
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