When a Check Is Drawn Against Bank a and Deposited

question 87

Essay

When a check is drawn against bank A and deposited in another bank, the first bank loses reserves as the check
is cleared. Yet the check collection involves no loss of reserves by the banking system. Explain what significance
this has for the lending ability of the system as a whole.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.