You Withdraw $2,000 from Your Account

question 576

Multiple Choice

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

• A) the quantity of money by $1,600.
• B) deposits by $1,600.
• C) the quantity of money by $2,000.
• D) deposits by $2,000.

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Definitions:

Pareto Optimal

A state of allocation of resources from which it is impossible to reallocate to make any one individual better off without making at least one individual worse off.

General Equilibrium

General equilibrium refers to a condition in an economy where supply and demand are in balance across all markets, taking into account the interrelations between these markets.

Inefficient

Refers to a situation where resources are not used in the most effective way, leading to wasted potential or output.

Edgeworth Box

Diagram showing all possible allocations of either two goods between two people or of two inputs between two production processes.