If the Reserve Requirement Is 25%, a New Deposit of $1,000

question 140

Multiple Choice

If the reserve requirement is 25%, a new deposit of $1,000 leads to a potential increase in the money supply of

• A) $250.
• B) $4,000.
• C) $5,000.
• D) $10,000.

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Definitions:

Price-taker Market

A market situation where individual sellers or buyers have no control over the price of a product, typically seen in perfectly competitive markets.

Long-run Equilibrium

This is a condition where all factors of production and outputs in an economy or market are optimized and can vary to reach a state of general equilibrium.

Price-taker Industry

An industry in which individual firms have no control over the price of their product and must accept the market price set by the forces of supply and demand.