A Banking System Has Total Deposits of $500 Billion and Total

question 76

Multiple Choice

A banking system has total deposits of $500 billion and total reserves of $130 billion. If the reserve requirement is 20%, what is the maximum possible deposit creation potential of the banking system?

• A) $150 billion
• B) $130 billion
• C) $500 billion
• D) $30 billion

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Definitions:

Import Quotas

Restrictions set by the government on the amount or monetary value of products allowed to be imported into a nation.

Tariffs

Taxes imposed by a government on imported goods, often used to protect domestic industries and to generate revenue.

Quantity of Imports

The total volume or value of goods and services brought into one country from another over a specified time period.

Deadweight Loss

When a good or service's free market equilibrium is not met, a reduction in economic efficiency occurs.