If a Bank Has $1,000,000 in Reserves and Checking Deposits

question 41

Multiple Choice

If a bank has $1,000,000 in reserves and checking deposits of $3,000,000, what is the bank's reserve position if the required reserve ratio is 20 percent?

• A)The bank has $500,000 of required reserves and $500,000 of excess reserves.
• B)The bank has $600,000 of required reserves and $400,000 of excess reserves.
• C)The bank has $400,000 of required reserves and $600,000 of excess reserves.
• D)The bank has $200,000 of required reserves and $800,000 of excess reserves.

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Definitions:

Indifference Curve

A graph that represents combinations of goods among which a consumer is indifferent, showing the same level of satisfaction to the consumer.

Utility

A measure of satisfaction, usefulness, or pleasure derived from consuming goods and services.

Budget Constraint

A limit on the consumption bundles that a consumer can afford given the prices of goods and the consumer's income.

Utility

The satisfaction or benefit derived from the consumption of goods and services.