Suppose That the Desired Reserve Ratio Is 20 Percent and That

question 40

Multiple Choice

Suppose that the desired reserve ratio is 20 percent and that a bank is just meeting that requirement when $10,000 in cash is withdrawn from a demand deposit.The bank must now

• A)decrease its reserves by $2,000.
• B)increase its reserves by $8,000.
• C)make $200,000 in new loans.
• D)do nothing since both its assets and liabilities are affected equally.

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive.

Sustainable Competitive Advantage

A long-term business advantage that is not easily duplicable or surpassable by competitors.

Socially Complex

Referring to entities or situations that involve intricate social interactions and relationships which are difficult to replicate or manage.

Unique History

A specific background or series of events that is distinctive to an individual, organization, or location.