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:

Broaden Distribution

Expanding the availability of a product or service to more locations or channels to reach a wider audience.

Fashion Product

A commodity related to the fashion industry, including clothing, accessories, and footwear, designed to satisfy consumer tastes and preferences.

Life Cycle Curve

A graphical representation of the stages through which a product goes from its introduction to the market through its growth, maturity, and eventual decline.

Early Adopters

A category of consumers who are among the first to purchase and use a new product or technology, often before the wider market adoption.