Everything Else Equal, If the Ratio of Bank Assets to Bank

question 12

Multiple Choice

Everything else equal, if the ratio of bank assets to bank capital decreases, the bank's return on equity should:

• A)Decrease
• B)Remain constant
• C)Increase
• D)Cannot be determined from the information provided

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Definitions:

Elasticity of Demand

The measure of how much the quantity demanded of a good or service changes in response to a change in its price.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product or service.

Profit-maximizing Price

The selling price that allows a firm to earn the highest possible profit given its cost structure and market demand.

Per Capita Income

The mean earnings received by an individual in a specific region or nation.