If a Bank Has Actual Reserves of $40,000 and a 20

question 111

Multiple Choice

If a bank has actual reserves of $40,000 and a 20 percent reserve requirement, then the maximum amount of checkable deposits the bank can have if excess reserves are zero is

• A) $100,000.
• B) $80,000.
• C) $300,000.
• D) $20,000.
• E) $200,000.

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Definitions:

Marginal Cost

The cost of producing one additional unit of a product, critical for decision-making in production.

Total Cost

The sum of fixed and variable costs incurred in the production of goods or services.

Output

The total quantity of goods or services produced by an individual, firm, or country within a certain period.

Diminishing Marginal Returns

A principle in economics that indicates a decreasing level of incremental output for each additional unit of input, after a certain point.