If the Desired Reserve Ratio Is 3 Percent and Deposits

question 8

Multiple Choice

If the desired reserve ratio is 3 percent and deposits are $5.75 billion, banks hold

• A)$0.1725 million in excess reserves.
• B)$192 million in reserves.
• C)$0.1725 million in reserves.
• D)$172.5 million in excess reserves.
• E)$172.5 million in reserves.

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Definitions:

Demand

The quantity of a good or service consumers are willing and able to purchase at various prices during a specified time period.

Cross-Price Elasticity

A measure of how much the quantity demanded of one good responds to a change in the price of another good.

Hot Dogs And Mustard

A classic food pairing where the mustard serves as a condiment for the hot dogs, enhancing flavor.

Price-Inelastic

A description of a good or service whose demanded quantity does not significantly change when its price changes, indicating low sensitivity to price.