Table 9-5 Bolton Bank: Partial Balance Sheet

question 139

Multiple Choice

Table 9-5
Bolton Bank: Partial Balance Sheet
(All figures in $ million)

-Refer to Table 9-5. If the required reserve ratio is 10% and the market interest rate is 8%, what is Bolton Bank's opportunity cost of holding the excess reserves it is currently holding?

• A) $5.6 million
• B) $3.2 million
• C) $0.8 million
• D) 0; Bolton Bank has no excess reserves.

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Definitions:

Perfect Substitutes

Goods or services that can be used in exact place of each other with no loss of utility to the consumer, often characterized by a constant marginal rate of substitution.

Production

The process of creating goods or services by combining various inputs like labor, raw materials, and machinery.

Marginal Productivity

Marginal productivity refers to the additional output that is produced by adding one more unit of a factor of production, holding all other factors constant.

Labor

Labor refers to the human effort, both physical and mental, used in the production of goods and services, forming a crucial component of the economic production process.