Suppose Warren Buffet Withdraws $1 Million from His Checking Account

question 36

Multiple Choice

Suppose Warren Buffet withdraws $1 million from his checking account at Chase Manhattan Bank.If the required reserve ratio is 20 percent,what is the maximum change in deposits in the banking system?

• A)-$5 million
• B)-$4 million
• C)-$200,000
• D)$1 million
• E)$5 million

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Definitions:

Exports

Sales of goods or services produced in one country purchased by residents of another country.

Imported Goods

Goods brought into a country from abroad for sale.

Excise Tax

A tax levied on specific goods, services, or transactions, usually to discourage their use or generate revenue.

Tariff

A levy enforced by the government on products and services that are brought in from foreign countries.