If a Bank Uses $100 of Excess Reserves to Make

question 252

Multiple Choice

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

• A)and wealth increase by $100.
• B)and wealth decrease by $100.
• C)increase by $100 while wealth does not change.
• D)decrease by $100 while wealth decreases by $100.

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Definitions:

Fundamental Attribution Error

is the cognitive bias that leads individuals to attribute others' actions to their character or personality while underestimating situational influences.

Actor-Observer Effect

A psychological tendency to attribute one’s own actions to external factors while attributing others’ actions to their internal characteristics.

Self-Serving Bias

The common human tendency to attribute positive events to their own character but attribute negative events to external factors.

Personal Experience

An individual’s direct observation or participation in events, forming the basis for knowledge, attitudes, or beliefs.