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If a Bank Receives an Additional Deposit of $50,000 and the Desired

question 434

Essay

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?


Definitions:

Marginal Revenue Product

The additional revenue generated by employing one more unit of input, such as labor, in the production process.

Resource

An input used in the production of goods or services, such as labor, land, capital, and technology.

Units

A standard quantity or measurement used to express the quantity of a product or dimension of a measure.

Purely Competitive Market

A market structure where no single buyer or seller has the power to influence prices, and products are perfectly substitutable.

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