If a Bank Has $50,000 in Excess Reserves at the End

question 87

Multiple Choice

If a bank has $50,000 in excess reserves at the end of a business day and the required reserve ratio is 20 percent,the bank can increase its profits by:

• A)keeping the excess reserves.
• B)loaning out $40,000.
• C)loaning out $50,000 to another bank.
• D)borrowing $50,000 to remove the excess reserves.
• E)keeping $10,000 and depositing $40,000 with the Fed.

---

Definitions:

Invincibility Fable

A cognitive bias often observed in adolescents who believe they are immune to common dangers, leading to risky behaviors.

Deductive Reasoning

An approach to reasoning where the outcome is derived by the alignment of various premises assumed to be accurate.

Sex Hormones

Chemical substances produced by the endocrine system that regulate sexual development, reproductive functions, and secondary sexual characteristics.

Estrogen

A group of steroid hormones that play a key role in the development and regulation of female reproductive and secondary sexual characteristics.