Suppose That a Bank Begins with $500 Million in Deposits

question 29

Multiple Choice

Suppose that a bank begins with $500 million in deposits and $100 million in reserves and is just meeting its desired reserve ratio. Now suppose a decrease in the required reserve ratio lowers the desired reserve ratio to 10 percent. After the fall in the desired reserve ratio but before the bank makes any changes, the bank's unplanned reserves are

• A) 0.
• B) $400 million.
• C) $450 million.
• D) $50 million.

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Definitions:

Psychological Disorder

A pattern of behavioral, cognitive, emotional, or physical symptoms shown by an individual, which causes distress, disability, or an increased risk of suffering, death, pain, or an important loss of freedom.

Stereotype

A widely held but fixed and oversimplified image or idea of a particular type of person or thing.

Dangerous

Something or someone that is likely to cause harm or injury.

Medical Model

An approach to understanding and treating illness that focuses on biological factors, treating mental or physical disorders as diseases with diagnoses and medical treatments.