In the Simple Deposit Expansion Model, If the Banking System

question 92

Multiple Choice

In the simple deposit expansion model, if the banking system has excess reserves of $75, and the desired reserve ratio is 20 percent, the potential expansion of chequable deposits is ________.

• A) $75
• B) $750
• C) $37.50
• D) $375

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Definitions:

Default

Failure to repay a loan according to the agreed terms.

Open-Economy Macroeconomic

The study of macroeconomic variables and policies in the context of an economy that interacts freely with other economies, focusing on issues like trade balances and exchange rates.

Real Interest Rates

The interest rate that has been adjusted for inflation, representing the true cost of borrowing and the true return on investment.

Currency Depreciate

The decrease in value of one currency in relation to another, often due to economic factors, leading to a reduction in the currency's purchasing power.