If the Required Reserve Ratio Is 10 Percent,an Increase in Bank

question 213

Multiple Choice

If the required reserve ratio is 10 percent,an increase in bank reserves of $1,000 can support an increase in checking account deposits (including the original deposit) in the banking system as a whole of up to

• A)$100.
• B)$1,000.
• C)$10,000.
• D)$100,000.

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Definitions:

Check

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer.

Shelter Principle

A legal doctrine in property law that allows a person who acquires property in good faith and without notice of prior claims to be protected from those claims.

Holder

In financial terms, an individual or entity that possesses a negotiable instrument, such as a check or bond, legally.

Holder In Due Course

A legal term for a person who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defenses and claims that could be asserted against the original payee.