Suppose a Bank Has $10,000 in Deposits and $1,000 in Reserves

question 221

Multiple Choice

Suppose a bank has $10,000 in deposits and $1,000 in reserves. The required reserve ratio is 5%. Which of the following occurs if the required reserve ratio is increased to 10%?

• A) The bank's required reserves will decrease to $500.
• B) The bank's excess reserves will increase to $1,000.
• C) The bank's required reserves will increase to $1,000.
• D) The bank's ability to create loans increases by 5%.

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Definitions:

Independent Random Samples

Samples selected from a population in such a way that each individual sample is chosen randomly and independently of each other.

Population Means

The average value of a numerical characteristic in a population, representing the central tendency of the population.

Confidence Interval

A confidence interval is a range of values, derived from sample statistics, used to estimate the true value of a population parameter with a certain degree of confidence.

Normally Distributed

Describes a type of continuous probability distribution for a real-valued random variable where the data forms a symmetric, bell-shaped curve about the mean.