If the Reserve Requirement Was 5% and a Bank Customer

question 115

Multiple Choice

If the reserve requirement was 5% and a bank customer makes a deposit of $1,000, the initial result would be:

• A)​a $950 increase in required reserves and a $50 increase in excess reserves.
• B)​a $20,000 increase in required reserves and a $950 increase in excess reserves.
• C)​a $50 increase in required reserves and a $20,000 increase in excess reserves.
• D)​none of the above

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Definitions:

Recession

A recession is a period of economic decline across a broad spectrum of the economy lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Government

The system or group of people governing an organized community, often a state.

Active Approach

A strategy or policy that involves direct intervention or action, often by the government or an organization, to achieve a specific goal.

Passive Approach

An investment strategy that involves minimal buying and selling actions, often associated with index fund investing.