If Banks Were Required to Keep 100% of Deposits in Reserves

question 176

Multiple Choice

If banks were required to keep 100% of deposits in reserves, they could

• A) make more loans.
• B) make no loans.
• C) create more deposits.
• D) only use required reserves for loans.

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Definitions:

Overhead Efficiency

The effectiveness with which an organization manages its overhead costs in relation to its operational activities.

Direct Labor-Hours

Cumulative working hours of employees specifically involved in the production process.

Variable Overhead

Costs that vary with the level of production or business activity, such as utilities or raw materials.

Materials Price Variance

The variance between the real expenses incurred from direct materials in manufacturing and the anticipated standard cost of those materials.