If a Bank Has Excess Reserves of $4,000 and Demand

question 148

Multiple Choice

If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 10 percent,then the bank has actual reserves of

• A)$14,000.
• B)$19,000.
• C)$24,000.
• D)$29,000.

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Definitions:

Inferior Good

An inferior good is one whose demand decreases as the income of the consumer increases, inversely related to income.

Price Decrease

A reduction in the cost of a good or service, which usually leads to an increase in the quantity demanded by consumers.

Allowance

An amount of money given regularly for a specific purpose, often by a parent to a child or by an employer to an employee.

Preferences

The subjective tastes and choices of consumers, which guide their decision-making in selecting among alternatives.