Assume a Simplified Banking System in Which All Banks Are

question 84

Multiple Choice

Assume a simplified banking system in which all banks are subject to a uniform reserve requirement of 20 percent and checkable deposits are the only from of money. A bank that received a new checkable deposit of $10,000 would be able to extend new loans up to a maximum of:

• A) $2,000.
• B) $8,000.
• C) $9,000.
• D) $10,000.

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Definitions:

Implicit Cost

Costs that represent the loss of potential income from using resources for one purpose instead of their next best alternative use.

Capital

Financial assets or physical goods that have value and are used in the production of other goods and services, such as machinery, buildings, or money.

Capital

Resources such as machinery, buildings, and equipment used in the production of goods and services.

Dormitories

Residential facilities provided by educational institutions for students to live in.