Use the Following to Answer Questions

question 92

Multiple Choice

Use the following to answer questions:
-(Scenario: Assets and Liabilities of the Banking System) Look at the scenario Assets and Liabilities of the Banking System. If the reserve ratio is 9% and the banking system does NOT want to hold excess reserves, how much more can be added to the money supply?

• A)about $667,000
• B)about $111,000
• C)$250,000
• D)$1 million

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Definitions:

Substitution Effect

The economic theory that as prices rise, or income decreases, consumers will replace more expensive items with less costly alternatives.

Output Effect

The impact on total output or production when a company expands its operations or when there is an increase in economic activity.

Increase In Rent

An upward adjustment in the payment required for the use of rental property, usually determined by market conditions or lease agreements.

Demand For Land

The desire and willingness of consumers or businesses to purchase land at given prices, influenced by factors such as location and potential for appreciation.