When Reserves Are Added to the Banking System, Depository Institutions

question 46

True/False

When reserves are added to the banking system, depository institutions may expand their lending but are not forced to do so.

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Definitions:

Confirmation Bias

The tendency to search for evidence that fits one’s beliefs while ignoring any evidence that does not fit those beliefs.

Convergent

Pertaining to an approach or process that involves bringing different elements together toward a common point or agreement.

Heuristic

A problem-solving approach that employs a practical method or various shortcuts to produce solutions that may not be perfect but are sufficient for the immediate goals.

Divergent

Thinking or a thought process that generates creative ideas by exploring many possible solutions, contrasting with convergent thinking.