If the Desired Reserve Ratio Is 3 Percent and Deposits

question 82

Multiple Choice

If the desired reserve ratio is 3 percent and deposits totaled $5.75 billion, banks hold

• A)$172.5 million in reserves.
• B)$0.1725 million in reserves.
• C)$172.5 million in excess reserves.
• D)$0.1725 million in excess reserves.
• E)$192 million in reserves.

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Definitions:

Accounting Profits

The difference between total revenue and explicit costs of a business, calculated using principles of accounting.

Economic Profits

The surplus left after total costs (including both explicit and implicit costs) are subtracted from total revenues.

Short-Run Marginal Costs

Costs associated with producing one more unit of a good or service in the short term, where some inputs are fixed.

Market Price

The current price at which an asset or service can be bought or sold in the open market.