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

question 61

Multiple Choice

If reserves in the banking system increase by $100, then chequable deposits will increase by $2000 in the simple model of deposit creation when the desired reserve ratio is ________.

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

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Definitions:

Investment Accounts

Accounts held at a financial institution that hold investments such as stocks, bonds, mutual funds, and ETFs, often for purposes of earning a return.

Trading Debt Securities

Securities bought and held primarily for sale in the near term to generate income on short-term price differences.

Fair Value

The estimated price at which an asset or liability could be traded in a fair transaction between willing parties.

Held-to-maturity Securities

Financial instruments that a company has the intent and ability to hold until they mature.