Suppose All Banks Are Subject to a Uniform Reserve Requirement

question 125

Multiple Choice

Suppose all banks are subject to a uniform reserve requirement of 20 percent and that the Union Bank has no excess reserves. If a new customer deposits $50,000, the bank could extend new loans up to a maximum of

• A) $10,000.
• B) $40,000.
• C) $50,000.
• D) $250,000.

---

Definitions:

Behavioral Economics

A field of economic research that examines how psychological, social, cognitive, and emotional factors affect economic decisions of individuals and institutions.

Brain Modularity

The concept that the human brain is composed of specialized modules or regions, each responsible for different functions or processes.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a person’s mind when evaluating a specific topic, concept, method, or decision.