Assume That When $100 of New Reserves Enter the Banking

question 31

True/False

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $625. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $500, then at that same point in time, loans for all banks amount to $2,625.

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Definitions:

Utility Schedule

A table that shows the level of satisfaction or utility that a consumer derives from consuming different quantities of a good or service.

Marginal Utility

The extra pleasure or benefit a consumer receives from having one additional unit of a product or service.

Pepsi

A global brand of carbonated soft drinks produced and manufactured by PepsiCo.

Marginal Utility

The extra pleasure or advantage gained by using an additional unit of a product or service.