If Reserves in the Banking System Increase by $100,then Checkable

question 63

Multiple Choice

If reserves in the banking system increase by $100,then checkable deposits will increase by $400 in the simple model of deposit creation when the required reserve ratio is

• A)0.01.
• B)0.10.
• C)0.20.
• D)0.25.

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Definitions:

Scale

The size or level of activity of a project, business, or operation, which can significantly affect its efficiency, costs, and profitability.

Decreasing Returns

A principle where an increase in the amount of one factor of production, while other factors are held constant, results in a lower ratio of output per input.

Diminishing Returns

A principle stating that if one factor of production is increased while others are held constant, the incremental output will eventually decrease.

Scale

The size or level of something, often used to describe the scope of a business operation or production.