If Banks Decide to Hold Some of Their Excess Reserves

question 126

Multiple Choice

If banks decide to hold some of their excess reserves instead of lending them all out:

• A)the money multiplier will be less than 1 divided by the required reserve ratio.
• B)a loan of $1 will lead to a change in the money supply by a multiple amount equal to 1 divided by the required reserve ratio.
• C)the money multiplier becomes 1 divided by the excess reserves.
• D)depositors will have to borrow more to increase the money supply.

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Definitions:

Carbon

An element that is the fundamental building block of life and a major component of many substances, including carbon dioxide and organic materials.

Reverse Logistics

The process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal.

Forward Logistics

The management and process of moving goods from the point of production to the point of sale, encompassing transportation, warehousing, and delivery to end consumers.

Manufacturer

A company or entity that produces finished goods from raw materials in a process known as manufacturing.