If the Proceeds of All Loans Are Deposited Somewhere in the Banking

question 57

Multiple Choice

If the proceeds of all loans are deposited somewhere in the banking system and if rr denotes the reserve-deposit ratio, then the total money supply is:

• A)reserves divided by rr.
• B)1/rr.
• C)reserves times rr.
• D)reserves divided by (1 - rr).

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Definitions:

Diminishing Marginal Product

The economic principle stating that, holding all else constant, as more of a certain input is employed in a production process, the incremental increase in outputs will eventually decrease.

Bushels of Wheat

A unit of measure used in agriculture, particularly in the United States, for trading and pricing wheat.

Workers

Individuals engaged in a task or activity for wages or salary.

Diminishing Marginal Product

The decrease in the additional output gained from using an extra unit of a production input, holding all other inputs constant, beyond a certain point.