Assume That the Desired Reserve Ratio Is 10 Percent and There

question 63

Multiple Choice

Assume that the desired reserve ratio is 10 percent and there are no excess reserves in the banking system.Also,suppose that the full-employment,non-inflationary level of GDP in this closed,private economy is $1,200.

-Refer to the above information.The equilibrium interest rate in this economy is:

• A) 3 percent.
• B) 4 percent.
• C) 5 percent.
• D) 6 percent.

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Definitions:

Endowment Fund

A fund where the principal amount is kept intact while the investment income is available for use, typically for the ongoing support of an organization.

General Fund

A main operating fund in governmental accounting, covering most basic services and activities.

Direct Increase

An increase in the value or quantity of an asset or account directly due to additional investments or improvements, rather than through earnings.

Capital Assets

Long-term assets acquired for use in business operations, expected to be used or held for more than one financial period.