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:

Domestic Producers

Domestic producers are companies or individuals that create goods and services within a country's borders.

Comparative Advantage

An economic principle that states a country should produce and export goods and services for which it is relatively more efficient at producing than other countries.

Absolute Advantage

The ability of an entity to produce a good or offer a service more efficiently than its competitors, using fewer resources.

Trade

The action of buying and selling goods and services among parties, which can occur within a country (domestic) or between countries (international).