The Required Reserve Ratio

question 530

Multiple Choice

The required reserve ratio

• A) is the amount of money that banks require borrowers to reserve in their accounts.
• B) is the fraction of a bank's total deposits that is required to be held in reserves.
• C) increases when withdrawals from a bank are made.
• D) is higher for banks that make riskier loans.

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Definitions:

MR

Stands for Marginal Revenue, which is the additional income earned from selling one more unit of a good or service.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit costs and opportunity costs.

Perfectly Competitive

A market structure where many firms sell identical products, entry and exit are easy, and no single seller can influence the market price.

Market Price

The present cost for purchasing or selling an asset or service within a specific market.