Suppose Darrell Has $4,000 in Currency Which He Deposits in His

question 48

Multiple Choice

Suppose Darrell has $4,000 in currency which he deposits in his bank. If the reserve ratio is 25 percent, this will lead to a maximum increase of ________ in M1 throughout all banks.

• A) $0
• B) $4,000
• C) $6,000
• D) $12,000

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Definitions:

Self-Serving Bias

A cognitive bias where individuals attribute positive outcomes to their own actions but negative outcomes to external factors.

System 2

A term often associated with dual-process theories of mind, representing the analytical, deliberate, and logical mode of thinking.

Framing Effects

Cognitive biases where people's decisions are influenced by the way information is presented, rather than just the information itself.

Anchoring

Anchoring is a psychological phenomenon wherein an individual relies too heavily on an initial piece of information, or 'anchor,' to make subsequent decisions.