If Reserves in the Banking System Increase by $100, Then

question 153

Multiple Choice

If reserves in the banking system increase by $100, then chequable deposits will increase by $1000 in the simple model of deposit creation when the desired reserve ratio is ________.

• A) 0.01
• B) 0.10
• C) 0.05
• D) 0.20

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Definitions:

Base Period

A specific time period used as a benchmark for comparing economic or financial data, such as in calculating inflation rates or index numbers.

Prices Received

The amount of money that producers get for selling one unit of a good or service, reflecting the market value from the perspective of sellers.

Direct Subsidies

Financial assistance provided by governments to individuals, organizations, or industries, aimed at supporting or promoting certain economic activities.

Federal Government

The national government of a federated state, which holds the authority to govern at a level above individual states or provinces.