Suppose the Entire Banking System Has $50 Million in Excess

question 50

Multiple Choice

Suppose the entire banking system has $50 million in excess reserves and a required reserve ratio of 10 percent.The deposit-creation potential of the banking system is:

• A) $500 million
• B) $50 million
• C) $10 million
• D) $5 million

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Definitions:

Equilibrium Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded in the market.

Efficiency Wage

A higher wage paid by employers to increase productivity by attracting better applicants, reducing turnover, and motivating employees.

Marginal Productivity

The additional output that is produced by adding one more unit of a factor of production, holding other factors constant.

Income Distribution

The way in which total income is divided among the population or different groups in an economy.