Suppose the Reserve Requirement Is 10 Percent

question 212

Multiple Choice

Suppose the reserve requirement is 10 percent. If a bank has $5 million of checkable deposits and actual reserves of $500,000, the bank

• A) can safely lend out $500,000.
• B) can safely lend out $5 million.
• C) can safely lend out $50,000.
• D) cannot safely lend out more money.

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Definitions:

Standard Deviations

An indicator of the degree of spread or diversity among a collection of numbers, showing the extent to which these numbers deviate from their average value.

Managerial Positions

Roles or jobs within an organization that involve overseeing, directing, or managing groups or projects.

Random Variable

A variable whose values are outcomes of a random phenomenon and can vary unpredictably.

Independent

In statistics, two events are considered independent if the occurrence of one does not affect the probability of the other.