If a 20 Percent Increase in the Price of One

question 84

Multiple Choice

If a 20 percent increase in the price of one good leads to a decrease of 10 percent in the demand for another good, the goods are:

• A) substitutes.
• B) normal.
• C) inferior.
• D) complements.

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Definitions:

Fractional Reserve

A banking system in which banks hold reserves that are less than the amount of their customers' deposits, allowing them to lend out the majority of deposited funds.

Commercial Banks

Organizations that take in deposits, issue different types of loans, and offer a range of financial services to both individuals and enterprises.

Savings Account

A bank account where money is kept for savings purposes, offering interest on the deposited funds.

Precautionary Cash Balances

Precautionary cash balances refer to money held by both businesses and individuals to meet unexpected expenses or financial emergencies.