The Commercial Banking System Can Lend by a Multiple of Its

question 111

Multiple Choice

The commercial banking system can lend by a multiple of its excess reserves primarily because:

• A) Its reserves are on deposit with the Federal Reserve Banks
• B) Its reserves are highly liquid assets
• C) It loses reserves when it extends credit
• D) Its required reserves are fractional

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Definitions:

Market Will Bear

The maximum price that consumers are willing to pay for a product or service in a given market.

Fixed Costs

Expenses that do not change with the level of goods or services a business produces, such as rent, salaries, and loan payments.

Pen Rentals

The service of lending pens, typically for temporary use, possibly related to specific events or locations where writing instruments are required.

Monthly Profit

The net income achieved by a business over the course of a single calendar month after all expenses have been deducted from total revenue.