Suppose You Found $5000 Hidden in Your Closet and Deposited

question 88

Multiple Choice

Suppose you found $5000 hidden in your closet and deposited it in a demand deposit account at your bank.If the desired reserve ratio was 10 percent,how much would the deposit directly create in excess reserves?

• A)$500
• B)$1500
• C)$4500
• D)$5500

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Definitions:

Siamese Twin Companies

Pairs of companies, often resulting from a demerger, whose shares are technically inseparable and therefore trade together on stock exchanges.

Incorrect Pricing

A situation where securities are valued incorrectly by the market, potentially offering opportunities for profit.

Representativeness Bias

The tendency to believe that a small sample is reliably representative of a broad population and therefore to infer patterns too quickly.

Over Reliance

The excessive dependence on a particular element, such as a specific resource, technology, or entity, which can lead to vulnerabilities.