Which of the Following Assumptions Made in Deriving the Simple

question 34

Multiple Choice

Which of the following assumptions made in deriving the simple deposit multiplier is unrealistic?

• A)The Fed sets the required reserve ratio.
• B)The Fed is able to affect the level of reserves in the banking system.
• C)Banks loan out all of their excess reserves.
• D)The simple deposit multiplier is equal to 1 divided by the required reserve ratio.

---

Definitions:

Rationalization

The process of justifying behaviors or attitudes with logical, plausible explanations, often ignoring the true reasons.

Unconscious Reasons

Motivations or reasons for actions that are not within the individual's conscious awareness.

Defense Mechanism

Psychological strategies employed unconsciously to protect oneself from anxiety or unacceptable thoughts and feelings.

Projection

A defense mechanism in which an individual ascribes their own unwanted thoughts, feelings, or impulses onto someone else.