When the Actual Reserve-Deposit Ratio Is Less Than the Desired

question 77

Multiple Choice

When the actual reserve-deposit ratio is less than the desired reserve-deposit ratio,banks will

• A) do nothing because this is a profitable situation.
• B) stop making loans.
• C) send the extra reserves to the central bank.
• D) request that customers withdraw deposits from the bank.
• E) make more loans in order to earn interest.

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Definitions:

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than another entity.

Geegaws

Ornamental objects of no substantial value, often considered trinkets or gadgets.

Doodads

Informal term for small objects or gadgets, often of little value and used for decoration or trivial purposes.

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit, and products that are close substitutes, leading to price determination by supply and demand.