A Bank That Has No Excess Reserves

question 222

Multiple Choice

A bank that has no excess reserves

• A) cannot create loans.
• B) is not in equilibrium.
• C) is on the brink of bankruptcy.
• D) has no required reserves.

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Definitions:

Future Returns

The projected earnings or losses on an investment over an upcoming period.

Efficient Markets Hypothesis

A theory that asserts that financial markets are "informationally efficient", meaning that prices of securities fully reflect all available information at any point in time.

EMH

Efficient Market Hypothesis, a theory that suggests all available information is already reflected in stock prices, hence making it difficult to achieve consistently higher returns.

Geometric Average

The geometric average is a method of calculating the mean that mitigates the impact of extreme values in a data set, commonly used in calculating investment returns.