Banks Are Required to Keep a Minimum Amount of Funds

question 60

Multiple Choice

Banks are required to keep a minimum amount of funds in reserve because

• A)Depositors may decide to withdraw funds at any time.
• B)The Fed may decide to withdraw funds at any time.
• C)The bank may decide to increase aggregate demand at any time.
• D)Borrowers may decide to repay loans ahead of schedule.

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Definitions:

Marginal Products

The additional output resulting from the increase of one unit of a specific input, holding all other inputs constant.

Separating Equilibrium

Separating equilibrium refers to a situation in a market, often under conditions of asymmetric information, where different types of people choose different strategies, revealing their type.

Pooling Equilibrium

A situation in a market where all types of customers receive the same offer or treatment from a seller because the seller cannot distinguish between different types of customers.

Microeconomics

The branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources.