Given a Required Reserve-Deposit Ratio of 5% for All Banks

question 20

Multiple Choice

Given a required reserve-deposit ratio of 5% for all banks and assuming individuals hold no cash,total bank reserves of $400 billion can support deposits of

• A) $400 billion.
• B) $800 billion.
• C) $4,000 billion.
• D) $8,000 billion.
• E) $9,000 billion.

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Definitions:

Francs

A currency formerly used in France and other countries, replaced by the euro in many areas.

Strong Axiom

Often refers to the strong axiom of revealed preference, which is a more stringent condition than the weak axiom, ensuring choices are consistent across different sets of available options.

Revealed Preferences

A theory that determines preferences by observing consumer choices and behaviors, rather than through direct inquiry about preferences.

Bundle

A collection of goods or services that are sold together as a single package deal.