If the Required Reserve Ratio Is 10 Percent and a Bank

question 46

Multiple Choice

If the required reserve ratio is 10 percent and a bank receives a new deposit for $100,000, then the _____

• A) bank must keep $5,000 in excess reserves.
• B) bank's required reserves increase by $45,000.
• C) bank's liabilities increase by $100,000.
• D) bank must keep $10,000 in excess reserves.
• E) bank can increase its loans by up to $400,000.

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Definitions:

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices within a given time period.

Supply

The total amount of a product or service that is available to consumers at a specific price over a given period.

Economy Moves

Refers to the overall changes or shifts in economic activity, growth, and health within a particular economy over time.

Ceteris Paribus

A Latin phrase meaning "other things being equal," used in economics to isolate the effect of one variable by holding others constant.