Explain What Economists Mean When They Apply the Rationality Assumption

question 295

Essay

Explain what economists mean when they apply the rationality assumption.

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Definitions:

Vault Cash

Physical currency held by banks within their vaults, used to meet customer withdrawals and other cash needs.

Primary Reserve

It is the part of a country's reservable deposits held in cash or in deposits with the central bank, used to manage liquidity and fulfill regulatory requirements.

Secondary Reserve

Secondary Reserve includes assets that are not as liquid as primary reserves but can still be quickly converted into cash.

Board of Governors

The leading body of a federal reserve system, overseeing the policy direction and regulatory functions of the central bank.