When a Bank Lends Excess Reserves to a Customer

question 231

Multiple Choice

When a bank lends excess reserves to a customer:

• A)this does not affect the money supply.
• B)the money supply is increased.
• C)the money supply is decreased.
• D)it has the same effect as when one customer writes a check to another customer at a different bank.

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Definitions:

Needs Analysis

The process of identifying and evaluating the needs of a particular group or organization to achieve its objectives.

Cost-effectiveness Evaluation

An assessment technique used to determine the best method of achieving a specific outcome with the least amount of resources, commonly applied in health economics and public policy.

Scrap

In a business context, scrap refers to waste material or unwanted items resulting from manufacturing processes, often recycled or discarded.

Return on Investment

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.