Assume That a Bank Has $2,000 in Total Reserves and $10,000

question 96

Multiple Choice

Assume that a bank has $2,000 in total reserves and $10,000 in checkable deposits and the required reserve ratio on checkable deposits is 20%.This bank's excess reserves equal

• A)$500.
• B)$250.
• C)$750.
• D)zero.

---

Definitions:

MPC

The Marginal Propensity to Consume, representing the proportion of any additional income that a consumer spends on goods and services, as opposed to saving it.

Crowding Out

The phenomenon where increased government spending leads to a reduction in private sector investment, due to higher interest rates or the consumption of financial resources.

Aggregate Demand

The aggregate need for goods and services in an economy at a specific price level and during a certain time frame.

Constitutional Amendment

A formal change or addition proposed to a constitution, which then requires ratification to become part of the document.