Suppose a Bank Has $1,000 in Deposits and $100 in Reserves.If

question 289

Multiple Choice

Suppose a bank has $1,000 in deposits and $100 in reserves.If the desired reserve ratio is 5 percent,how much can this bank increase its loans?

• A)$0
• B)$400
• C)$80
• D)$50
• E)$100

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Definitions:

Automatic Stabilizer

Economic policies and programs designed to automatically reduce fluctuations in an economy's output, such as progressive taxation and welfare.

Tax Collections

The process by which government entities gather money from individuals and businesses in the form of taxes to fund public expenses.

Federal Budget Deficits

Refers to the shortfall when a government's expenditures exceed its revenues in a given fiscal year.

Century

A period of 100 years, often used to denote significant historical timelines or epochs.