If the Banking System Has Demand Deposits of $100,000,total Reserves

question 38

Multiple Choice

If the banking system has demand deposits of $100,000,total reserves equal to $20,000,and a required reserve ratio of 20 percent,the banking system can increase the volume of loans by

• A)$0.
• B)$20,000.
• C)$80,000.
• D)$100,000.

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Definitions:

Average Costs

It's the cost associated with producing each unit, found by dividing the entire production expenses by the number of units produced.

Returns to Scale

The rate at which output increases as inputs are increased proportionally, indicating how efficiently larger production scales affect production volume.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm or operation grows in scale, opposite of economies of scale.

Returns to Scale

The change in output resulting from a proportionate increase in all inputs; the concept explains how output changes with varying levels of input.