The Fact That Reserves Lost by Any Particular Bank Will

question 255

Multiple Choice

The fact that reserves lost by any particular bank will be gained by some other bank explains why the commercial banking system

• A) has been able to reduce the vulnerability of banks to "runs" or "panics."
• B) can increase its demand deposits by a multiple of its excess reserves.
• C) cannot increase its demand deposits by a multiple of its excess reserves.
• D) has been based on the fractional reserve system of banking.

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Definitions:

Producer Surplus

The difference between the amount that producers are willing and able to sell a good for and the amount they actually receive (market price).

Total Surplus

The sum of consumer surplus and producer surplus, representing the total net benefit to society from a market transaction.

Deadweight Loss

The reduction of economic efficiency that happens when the free market does not achieve equilibrium for a particular good or service.

Tariff

A tax imposed by a government on goods and services imported from other countries to protect domestic industries from foreign competition.