Assuming a Required Reserve Ratio of 5%,interest Rate on Reserves

question 47

Multiple Choice

Assuming a required reserve ratio of 5%,interest rate on reserves of 1%,and interest rate on loans of 6%,what is the effective cost of the reserve requirement on a $10,000 deposit?

• A) 0.05%
• B) 0.25%
• C) 0.30%
• D) 1%

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Definitions:

Marginal Revenue

The rise in income generated by selling an additional unit of a product or service.

Marginal Revenue

The rise in income generated by selling one more unit of a product or service.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting consumers' sensitivity to price changes.