If the Banking System Has Demand Deposits of $100,000,total Reserves

question 43

Multiple Choice

If the banking system has demand deposits of $100,000,total reserves equal to $15,000,and a required reserve ratio of 10 percent,the banking system can increase the volume of loans by a maximum of

• A)$5,000.
• B)$50,000.
• C)$85,000.
• D)$100,000.

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Definitions:

Purely Competitive

A market structure characterized by many buyers and sellers, free entry and exit, and a product that is homogeneous across suppliers, leading to price being determined by supply and demand.

Profit-Maximizing

The process a business undertakes to determine the pricing and output that lead to the greatest returns.

Purely Competitive

A market structure characterized by many sellers offering identical products, leading to a situation where no single seller can influence price.

Output

The amount of product or service produced by a company, industry, or economy within a specific period.