Suppose a Bank Has $100,000 in Checking Account Deposits with No

question 55

Multiple Choice

Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 12 percent,then the bank will now have excess reserves of

• A)$12,000.
• B)$0.
• C)-$2,000.
• D)-$12,000.

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Definitions:

Asymmetric Information

Asymmetric information exists when one party in a transaction has more or better information than the other, potentially leading to an imbalance in power or unfair outcomes.

Standardization

The process of making something conform to a standard, typically to facilitate compatibility and interoperability among multiple items or systems.

Government Regulation

The establishment of rules by government authorities designed to control and govern the conduct of industries, businesses, and individuals to ensure public welfare.

Adverse Selection

A situation where asymmetrical information leads to the selection of poor risks by one party in a contract or agreement.