The Reserve Ratio Is 10 Percent

question 88

Multiple Choice

The reserve ratio is 10 percent. After the Fed buys $1 million in U.S. government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank A, Bank A lends a construction company an amount equal to its excess reserves. The construction company spends the entire amount on lumber from a lumber yard, which deposits the construction company's check in its deposit account with Bank A. The maximum loan Bank A can now make is

• A) $900,000.
• B) $100,000.
• C) $810,000.
• D) $1 million.

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Definitions:

Multiple Sclerosis

A chronic autoimmune disease affecting the brain and spinal cord, leading to varying levels of physical and cognitive disability.

Myelin Sheath

A protective layer of fatty substance that wraps around nerve fibers, enhancing the speed and efficiency of electrical signal transmission.

Action Potential

Action Potential is a momentary change in electrical potential on the surface of a neuron that occurs when it is activated and is capable of transmitting an impulse.

Axon

A long, slender projection of a nerve cell that typically conducts electrical impulses away from the neuron's cell body.