If Reserves in the Banking System Increase by $100, Then

question 153

Multiple Choice

If reserves in the banking system increase by $100, then chequable deposits will increase by $1000 in the simple model of deposit creation when the desired reserve ratio is ________.

• A) 0.01
• B) 0.10
• C) 0.05
• D) 0.20

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Definitions:

VaR

Value at Risk, a statistical measure used to assess the level of financial risk within a firm, portfolio, or position over a specific time frame.

Normally Distributed Returns

Returns on investment that follow a bell-shaped curve, indicating that most of the returns are concentrated around the mean.

Standard Deviation

A measure of the dispersion of returns for a given security or market index, indicating the degree of volatility.

Passive Investment Strategies

Investment strategies that involve minimal buying and selling, often mirroring an index.