Suppose That Initially a Bank Has Excess Reserves of $800

question 230

Multiple Choice

Suppose that initially a bank has excess reserves of $800 and the reserve ratio is 30%.Then Andy deposits $1 000 of cash in his chequing account and the bank lends $600 to Molly.That bank can lend an additional:

• A) $100.
• B) $800.
• C) $900.
• D) $300.

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Definitions:

Economic Efficiency

Refers to the optimal production and distribution of resources to maximize social welfare and minimize waste.

Real Wage

The purchasing power of wages, adjusted for inflation, indicating the quantity of goods and services that can be bought.

Purchasing Power

The ability of an individual or entity to buy goods and services, essentially reflecting the amount of goods or services that one unit of currency can buy.

Nominal Wage

The wage measured in dollars of the year in question; the dollar amount on a paycheck.